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significant structural differences from the current eu member states. one of these differences is that the accession candidates are in a process of catching - up economically. they generally have inflation rates which are higher than those in the more mature and more slowly growing eu member states. this is an outcome, first, of differences in productivity gains across countries and sectors - known as the balassa - samuelson effect - and, second, of shifts in demand. the resulting real appreciation does not pose an obstacle to eu enlargement in terms of progress in the liberalisation of foreign trade and its ensuing welfare gains for the eu as a whole. nevertheless, if the eu accession candidates participate in monetary union before the existing structural disparities are eliminated, the single monetary policy in the euro area will not meet the needs of all the member states. a hasty enlargement of emu would therefore harbour stability risks for the euro area and might generate tensions among the participating countries. accession to the eu, however, does not imply immediate full membership of emu. instead, the eu accession countries will participate initially as “ member states with a derogation ” in the third stage of economic and monetary union. the precondition for full emu membership is that the accession countries achieve a high degree of sustainable economic convergence. the convergence criteria laid down in the maastricht treaty are the yardstick for this. these criteria set unambiguously verifiable requirements in terms of price stability, long - term interest rate levels, the government fiscal position, and participation in the exchange - rate mechanism of the european monetary system, erm ii. in addition, pursuant to article 121 of the eu treaty, the examination of the sustainability of achieved convergence “ should also take account of... the results of the integration of markets, the situation and development of the balances of payment on current account and... the development of unit labour costs and other price indices ”. the convergence criteria are designed to guard against inflationary tendencies within the monetary union and to prevent tensions arising from structural divergences in inflation. the task of stabilisation does make stringent demands on the monetary policy of the accession countries, but price stability may be regarded as a sine qua non of sustainable growth. for that reason, the accession countries not least in their own interests - should not enter emu until the process of catching up economically has already made significant headway and the adjustment function of the exchange rate can be more | would welcome my observations on these developments. let me make these observations by answering the following questions. first, why should we be concerned about these developments? second, how concerned should we be? and third, what should be done about it? why should we be concerned? let me start with why we should be concerned. this is, in my view, a question that we should take care to answer, and to answer properly. we should not assume that everyone knows the reasons for our concern. it should be clear that the governing council does not simply support the rules and procedures of the stability and growth pact for the sake of the rules and procedures themselves. if we defend the pact, it is because we believe that it makes good economic sense. it can contribute to the attainment of our societies ’ fundamental economic objectives. by respecting the rules of the pact, a member state pursues a sound fiscal policy. and this is in its own interest. a government that maintains a budgetary position that is close to balance or in surplus over the medium term and reduces its debt to a low and sustainable level has room to pursue its desired tax and spending policies. it also creates scope and increases flexibility to cushion the effects of the economic cycle. by contrast, a government that pursues an inappropriate fiscal policy, resulting in persistent deficits and higher levels of debt, increasingly limits its room for policy action. money spent paying interest on higher levels of debt cannot be used to provide public services or to lower taxes. and experience has shown that while such a trend of high deficits, higher debt and higher interest payments, and thus still higher deficits and so on, can easily be established, it is much harder to reverse. there is no fundamental choice between stability and growth. sometimes there seems to be such a choice. but it is either temporary or illusory. in the longer term and in reality, stability is a precondition for growth. they are two sides of the same coin. and sound public finances create conditions which are conducive to stability and sustainable growth. nowhere is there a better example of this than here in ireland. in the late 1970s and early 1980s, ireland ’ s debt increased dramatically and economic growth slowed. then, in the mid - 1980s, ireland changed course. it began to put its fiscal house in order. we all know what has happened since then. over the last 15 years, ireland ’ s debt ratio has been reduced from over 100 % to around 30 | 0 |
, because monetary policy is forward - looking, we have to make a best possible evaluation of likely developments several quarters ahead. as we look to 2002, the timing and extent of a recovery in economic activity will depend crucially on geopolitics and on how quickly confidence returns to normal. as we discussed in our november monetary policy report, one can envisage two scenarios ( chart 3 ). in the first, confidence could be restored quickly, and robust growth could resume in early 2002, supported by the substantial monetary and fiscal stimulus already in place. in the second, confidence could stay fragile for some time, and growth would be anemic through most of 2002. note that, under either scenario, the canadian economy would still be operating at levels that are below capacity by the end of 2002. this means that inflation would continue to be below target through next year. how has the bank responded to all this? to underpin confidence in the wake of the extraordinary uncertainty generated by the terrorist acts, we took the exceptional step of lowering our key policy interest rate by 1 / 2 of a percentage point on 17 september, outside our regular fixed announcement schedule. and we moved again to ease rapidly — by 3 / 4 of a percentage point, on 23 october, and by 1 / 2 of a percentage point, on 27 november. the cumulative reduction in policy interest rates since the beginning of the year amounts to 3 1 / 2 percentage points, of which more than half — 2 full percentage points — occurring since late august. this substantial amount of monetary stimulus will work to support a resumption of healthy growth in output, investment, and employment, given canada ’ s solid economic foundations. in view of the ongoing uncertainties, it is still too early to characterize the economic outlook with great assurance. nonetheless, signs that the geopolitical situation may be stabilizing and that households and firms are beginning to adjust to the new environment, suggest a somewhat greater likelihood that the bank ’ s more optimistic scenario may come to pass than was the case a month ago. in closing, let me stress that i have oversimplified how the bank judges the performance of the economy relative to its potential. in addition, i have not mentioned all the factors that can influence the growth of potential or the future path of inflation. but i have provided the basic elements of the inflation - targeting approach that the bank uses to help promote good economic performance. mr. chairman, in my remarks today i focused, | ##eu – namely the green transition and digitalization – might put a positive pressure on the potential output growth. investments in green and digital technologies could boost labor productivity and foster sustainable growth. consequently, the ultimate question we policy makers must find answers to is which factors will be dominating in the near future. with such long - term developments and the current circumstances, how should we balance economic slowdown and increasing prices? to be more precise, what weight should we give to the taylor rule variables and what time dimension of projections should we focus on? there is some merit to believe that structural forces that push neutral interest rate lower such as demographics, globalization and digitalization may not fade out - globalization may be an exception to some extent as i tried to explain - and a threat of the too - low inflation may return to our agenda. in other words, if the interest rate changes affect prices in one - to - two years ’ time only, how strong should we be in reducing our monetary policy accommodation? nevertheless, this does not change the fact that in the current environment we must tighten monetary policy to keep inflation expectations from increasing to unsustainable levels. de - anchored inflation expectations would make it much more difficult for the central bank to achieve its mandate of price stability. overall, i think we should gradually raise rates to retain credibility. we must be apprehensive, that, as the neutral rate is currently much lower, we cannot increase policy rates to the levels seen 15 - 20 years ago. still, as of this moment, it is extremely important to prevent the situation in which inflation expectations become entrenched at significantly higher levels than our inflation targets over the medium term. looking at the longer horizon, at the next strategy review, it is worth discussing what monetary policy framework is mostly fit for the new issues that relate to climate change risks, retreating globalization, and returning geopolitical threats. to this end, i am grateful for this opportunity to exchange the views in this panel discussion. monetary policy | 0 |
banks lose on the swings, they may regain on the roundabouts. the banks ’ pricing can take into account risk classes and collateral, but there is not always a direct connection between prices and risk classes. however, developments in regulations and on the capital market favour a stronger connection between interest rates on loans and risk classification of the borrower. the banks ’ credit assessment procedure is not a static process. the major swedish banks currently have well - functioning organisations, methods and systems for assessing loans and managing credit risk. developments in financial theory and rapid advances in it over the past decade have created new and improved conditions in this field, and the banks have made good use of this. as a borrower it is important to be aware that the individualisation in the modern credit granting process has also been taken up in the shaping of the new capital adequacy rules, where it will be possible to price loans more fairly. why do we have capital adequacy rules? as the banks play such a central role in the payment system, and the costs of disturbances in the system and in the credit market would be very large and have to be borne not only by the borrowers and lenders, but by society as a whole, the banks have long been subject to scrutiny and oversight with regard to their risk - taking. since 1988 we have had an international agreement, the basel accord on capital adequacy rules. this involves, in simple terms, regulations as to how much capital a bank must hold with regard to different borrower groups for each hundred krona it lends out. it is much more costly for the banks to finance themselves by holding their own capital than through borrowing, just as for other companies. a higher capital adequacy requirement for taking bigger risks will thus lead to the banks being forced to charge more for lending money to higher risk borrowers. this is a regulatory system that is used by 120 countries and it contributes to financial stability around the world. however, the current capital adequacy rules from 1988 are divided into 4 fairly rough risk classes, which do not very well reflect the risk with various borrowers. for instance, the risk classification means that all companies are in the same risk class, despite the fact that they can differ markedly from one another. there has therefore been intensive work on further developing these rules by the basel committee, in which both the riksbank and finansinspektionen ( the swedish financial supervisory authority ) participate | jean - claude trichet : the euro after two years : european competitiveness in a globalized global world speech by mr jean - claude trichet, governor of the banque de france, to the swedish national committee of the international chamber of commerce, stockholm, 6 april 2001. * * * ladies and gentlemen, it is a great pleasure and an honour for me to be invited to speak at this meeting of the swedish national committee of the international chamber of commerce, today in stockholm. i am particularly happy to express my views on the already successful existence of the euro and monetary union, and the conditions and prospects for its further success. as you all know, within nine months, on 1st january 2002, the euro will become a reality across europe as euro banknotes and coins are introduced. this will be the largest monetary change over the world has ever seen. however, it should be recalled that for all economic, monetary and institutional purposes, monetary union was created on 1st january 1999. then, a decisive event in the history of europe occurred. the euro was born and the irreversible nature of this change has convinced an increasing number of economic players that the success of the euro is necessary for europe. it is a keystone of the european single market, which will ensure prosperity in europe for the benefit of the rest of the world. i would like to draw your attention to why the euro and monetary union have been successful from the outset, and to the conditions and prospects for building on this success. i. the euro and monetary union are based on a credible monetary policy and contribute to an appropriate economic and monetary equilibrium in europe i. 1 a credible, stability - oriented monetary policy a / first of all, let me point out that, from a technical and operational point of view, the launch of the euro on financial markets has been an indisputable success. in this respect, one has to remember all the doubts voiced three years ago. the decentralised organisation of the eurosystem has achieved the objectives it was assigned in three important respects : – operational efficiency, as is demonstrated by the timely adjustment of banking liquidity and steering of short - term interest rates ; – the security provided by the procedures and systems implemented by the eurosystem, both for the execution of its operations and in the field of large - value payments. at the shortest end of the market, the integration of the interbank market took place in 1999, right from the start of monetary union, thanks to | 0 |
increases in activity and employment have been accompanied by very low inflation rates. the fall in oil prices has prompted declines in the general level of prices over much of the past year. yet core inflation, the indicator that excludes energy and fresh food prices, has moved on a rising course over the year. and while still at moderate levels, this indicator ’ s recent trajectory suggests the risks of entering an overly prolonged period of very low inflation have progressively been dispelled. while in july the overall price index posted growth of 0. 1 %, influenced by fuel prices, inflation at the end of the year is expected to be around 1 %. in any event, the still - high spare capacity in the economy presages a gradual recovery in inflation over the next two years. the factors underpinning the recovery the path of recovery of growth and employment has essentially been underpinned by the restoring of macroeconomic and financial equilibria, which were severely eroded in the crisis. progress has been visible in the correction of the external imbalance, the deleveraging of households and firms, the redressing of fiscal balances towards levels more compatible with the sustainability of public finances and the restructuring and consolidation of the banking sector. unemployment, too, is showing clear signs of a correction. the reforms undertaken within spain, along with the headway in economic and monetary union and the application of the highly expansionary monetary policy by the ecb, have proven key to restoring confidence and providing for the progressive absorption of the imbalances. by way of illustration, the proportion of spanish public debt held by nonresidents has risen from 30 % in 2012 to 44 % at present, an increase indicative of the improved confidence in our economy, but also of its dependence on the perception abroad of the soundness and continuity of our recovery. despite what has been achieved in growth, employment and restoring equilibria, we are far from having overcome all the factors of vulnerability. doubts over the continuity of the macroeconomic, fiscal and financial rebalancing drive might curtail and lead to backtracking from these achievements. we must not forget that the legacy of the crisis is still burdensome. our unemployment rate remains above 22 % ; households and firms are speedily reducing their high debt, but public debt as a proportion of gdp has increased by over 60 pp since 2007 ; and the economy ’ s financial dependence on the external sector remains high, with a net debtor position of close to | for release on delivery 6 : 45 p. m. est december 6, 2018 welcoming remarks by jerome h. powell chairman board of governors of the federal reserve system at the housing assistance council ’ s 2018 rural housing conference washington, d. c. december 6, 2018 thank you for the kind introduction, and thank you to the housing assistance council ( hac ) for inviting me to be part of this discussion of rural housing. i understand that you will shortly be presenting awards to people who are working at the local and national levels and in both the public and private sectors and whose efforts have improved housing conditions for the rural poor. all of you who work in these roles are doing your country a great service by helping to advance economic opportunity in our communities. i want to thank the award recipients for the difference you make in the lives of people in rural communities. i am happy to report that our economy is currently performing very well overall, with strong job creation and gradually rising wages. the unemployment rate is 3. 7 percent, the lowest since 1969. a strong job market has encouraged more people to participate in the labor market, another positive development. in fact, by many nationallevel measures, our labor market is very strong. as those at this conference are acutely aware, however, aggregate statistics can mask important variations between different demographic and income groups, as well as significant regional differences. for example, unemployment rates in some persistently poor rural counties remain much higher than the national figures. the annual average unemployment rate in 2017 exceeded 10 percent in 27 persistently poor rural counties, and the rate was 20 percent or more in 2 of those counties. recent fed research found that, since 2007, labor force participation rates for those in their prime working years in rural areas have increasingly lagged rates in urban areas. labor force participation has been particularly low for those with only a high school diploma or less. 1 research has alison weingarden ( 2017 ), “ labor market outcomes in metropolitan and non - metropolitan areas : signs of growing disparities, ” feds notes ( washington : board of governors of the federal reserve - 2also found that business formation and employment growth during the recovery have been concentrated in large urban areas. 2 data and research findings like these remind us that, despite positive trends in national data, the benefits of the ongoing economic expansion are still not reaching some communities. through the fed ’ s 12 reserve banks and their branches, we are able to get a clearer picture of conditions in | 0 |
s criteria and have proposed grandfathering as a possible solution. others have raised questions about whether the leverage ratio or the risk - based capital framework provides the more appropriate calibration benchmark for the minimum longterm debt requirement. comments from foreign banks have also addressed our proposal to impose internal long - term debt requirements on the u. s. intermediate holding companies of foreign banks and have asked, among other things, whether the proposed requirement should vary more depending on the resolution strategy of the parent foreign bank. we are currently carefully reviewing these comments. one thing is clear : the long - term debt requirement is a critical component in ending too big to fail. the long - term debt requirement together with rigorous resolution plans and operational preparedness, the capital surcharges along with the capital stress tests, and the availability of sufficient amounts of high - quality liquidity where it is most likely to be needed will all substantially decrease the risk that a large financial institution ’ s distress could pose to the broader financial system and help ensure that no banking institution is too large and too complex to fail. they will move us closer to our goal of a safer, more responsible, and more resilient financial system. references adrian, tobias, michael fleming, or shachar, and erik vogt ( 2015 ). “ has u. s. corporate bond market liquidity deteriorated? “ federal reserve bank of new york, liberty street economics ( blog ), october 5. bis central bankers ’ speeches adrian, tobias, michael fleming, daniel stackman, and erik vogt ( 2015 ). “ what ’ s driving dealer balance sheet stagnation? “ federal reserve bank of new york, liberty street economics ( blog ), august 21. adrian, tobias, michael fleming, erik vogt, and zachary wojtowicz ( 2016a ), “ corporate bond market liquidity redux : more price - based evidence, ” federal reserve bank of new york, liberty street economics ( blog ), february 9. - - - - - - - - - ( 2016b ), “ further analysis of corporate bond market liquidity, ” federal reserve bank of new york, liberty street economics ( blog ), february 10. bank for international settlements, committee on the global financial system ( 2016 ). “ fixed income market liquidity ( pdf ), ” cgfs papers, no. 55. basel, switzerland : bis, january. blanchard, olivier ( 2016 ). “ the u. s. phillips | industries, regions, and nations. decisions about policies to directly address climate change should be made by the elected branches of government and thus reflect the public ’ s will as expressed through elections. at the same time, in my view, the fed does have narrow, but important, responsibilities regarding climate - related financial risks. these responsibilities are tightly linked to our responsibilities for bank supervision. 6 the public reasonably expects supervisors to require that banks understand, and appropriately manage, their material risks, including the financial risks of climate change. but without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate - based goals. 7 we are not, and will not be, a “ climate policymaker. ” like our monetary policy independence, our independence in this area comes with a high level of transparency about our policies and procedures. for details, see board of governors ( 2022 ). while u. s. monetary policy has the dual mandate of maximum employment and price stability, some other central banks have somewhat more expansive mandates. the bank of england and the european central bank both have a primary mandate to maintain price stability but a secondary mandate to support the economic policies of the u. k. government and the european union, respectively ; see the bank of england act 1998, part ii ( 11 ), available from the u. k. national archives at https : / / www. legislation. gov. uk / ukpga / 1998 / 11 / contents, and the treaty on the functioning of the european union, article 127 ( 1 ), available from the european union at https : / / lexparency. org / eu / tfeu / art _ 127. - 4references alesina, alberto, and lawrence h. summers ( 1993 ). “ central bank independence and macroeconomic performance : some comparative evidence, ” journal of money, credit and banking, vol. 25 ( may ), pp. 151−62. bernanke, ben s. ( 2010 ). “ central bank independence, transparency, and accountability, ” speech delivered at the institute for monetary and economic studies international conference, bank of japan, tokyo, japan, may 25, https : / / www. federalreserve. gov / newsevents / speech / bernanke20100525a. htm. board of governors of the federal reserve system ( 2022 ). “ federal reserve board invites | 0.5 |
authorities agreed to double the size of the cmim to usd 240 billion, and expand its scope to also cover crisis prevention. bis central bankers ’ speeches working age have to provide for one dependent person, for japan, the united states, asia, and latin america, respectively. low fertility rates and population aging have been the main cause of prolonged low economic growth in japan since 1990. this is also likely to become a big issue even for korea and china in the not - so - distant future. some latin american countries may also have similar concerns, although the degree varies across jurisdictions. having this future vision well in mind, we have to be prepared even now to implement the necessary social reforms, including the restructuring of social security systems, tax reforms, and revision of employment systems. second, let us consider the development of asset prices and credit expansion. in slides 10, 11, 12, and 13, the development of property prices and loans in real terms is added to the chart of the working - age population ratio ( inverse dependency ratio ) in the previous slides 6, 7, 8, and 9, respectively. in japan and the united states, we see a significant relationship between population dynamics and real asset prices. a similar tendency is also observed in china, as representative of asia, and brazil, as representative of latin america. whether this development leads to the generation and bursting of asset bubble depends largely on future policy implementation in the respective regions. to address these structural problems, it might be more effective for both regions to collaborate, rather than to deal with them individually and independently. the following three points are also issues to be considered cooperatively. first, as an economy develops and a middle - income class emerges, we need to implement measures to realize a more balanced growth between domestic and external demands. at the same time, the population eventually ages as the economy matures, and thus the key to success will be the promotion of domestic demand appropriately in line with the developmental stage of the economy. second, from the viewpoint of reducing asset price volatility, it is also important to further develop regional capital markets with the aim of enhancing resilience against external shocks. in this regard, we need to take into account market differences within the region. third, it is essential for each jurisdiction to harmonize its market regulations and practices with the global standards in promoting cross - border transactions. however, unilateral effort by a single jurisdiction has its limitations, and thus collective effort is desirable to improve market | banks to make cross - border collateral arrangements ( cbcas ), aimed at further enhancing financial stability in the region. cbcas are arrangements whereby a central bank provides local currency liquidity by accepting foreign currency assets, such as sovereign bonds in foreign countries, as eligible collateral. such arrangements already exist in some advanced countries. cbcas are thought to be an effective framework particularly in times of short - term money market stress. foreign financial institutions ’ branches and subsidiaries often lack stable local funding sources, such as retail deposits. however, under a cbca, they can still continue to provide credit to their customers, who are in most cases branches and subsidiaries of non - financial corporations domiciled in their home countries. in fact, a cbca was established in november last year between the bank of japan and the bank of thailand, as there are many japanese non - financial corporations operating in thailand. at almost the same time, a cbca was announced between bank negara malaysia and the monetary authority of singapore, and early this year between bank negara malaysia and the bank of thailand. meanwhile, emeap has formed an action group and made a cbca reference template for their future expansion in the region. so far, they are bilateral negotiations between two jurisdictions, depending on their necessity. moreover, japan and china are making efforts to enhance mutual cooperation towards the development of financial markets in the two largest asian economies. owing to cooperation between the authorities and private market participants, many tangible outcomes have already been achieved, including the purchase of chinese government bonds by the japan ’ s foreign exchange fund special account and the start of direct exchange between japanese yen and chinese renminbi on the tokyo and shanghai markets. 4. towards inter - regional financial cooperation as economic and financial linkages deepen, i believe that the above - mentioned efforts and issues addressed in asia can be shared more or less with latin america. both regions also have common structural problems. i believe that it is fruitful for regions bearing similar problems to resolve them collaboratively. first, let me raise the issue of demographic change and economic potential. slides 6, 7, 8, and 9 show the ratio of working - age population to the rest, that is, how many people of at the same time, the authorities expanded the total borrowing amount from usd 90 billion to usd 120 billion, enabling prompt and effective u. s. dollar support in times of crisis. moreover, at the above - mentioned finance ministers ’ and central bank governors ’ meeting, the | 1 |
it runs counter to the idea of a single market and fosters regulatory arbitrage ; and it violates the principle of same business, same risks, same rules. every day we supervisors struggle to maintain the equal treatment of banks that have to comply with different rules even though these differences are not justified by national specificities with regard to risks. that said, where we do have scope to act, we have made use of it. we have, for instance, agreed to exercise options and discretions contained in european law in a harmonised manner. this was a huge step, but more could be done. that, however, is up to the legislators. and there are indeed a few areas where further harmonisation would help the single market to progress : the fit and proper assessments of banks ’ board members, the liquidation of banks, large exposures and the supervision of branches of non - eu banks. now, don ’ t get me wrong : what has been achieved so far is truly remarkable. no large reform project has ever been perfect from the start, so it is only natural that more remains to be done. and it is worth putting our achievements into perspective. a lot has been done in a short time. the banking union is a project that is unprecedented in scope and scale. just look at its first pillar, european banking supervision. it involves 26 authorities from 19 countries plus the ecb. this sometimes prompts questions about how efficient it can really be. did we, in the end, just build a huge and overly complex bureaucratic machine? well, i ’ m not giving away any secrets if i tell you that it is kind of complex. and to countries that are thinking about joining the banking union through close cooperation agreements, it might look even more complicated. 3 / 7 bis central bankers'speeches in order to take a decision, we have to follow a finely balanced procedure. one of the reasons is that two bodies are involved which have to interact in a careful manner. the first one is the ecb ’ s supervisory board, which brings together the ecb and all the national supervisors. the second body is the ecb ’ s governing council ; it brings together all the national central banks and acts as the ultimate decision - making body. while both bodies play a role when it comes to taking decisions, they are, at the same time, subject to what is known as the separation principle. this principle was put in place to deal with potential conflicts of interest between monetary policy | corrupt practices. ladies and gentlemen, a strong regulator is needed to act as a vigilant watchdog on the banks and banking industry as a whole. you would be delighted to know that sbp has also been maintaining a centralized database with multiple objectives of cross - matching the antecedents of persons being appointed on key positions in banks / dfis as per the requirement under its fit & proper test ( fpt ) criteria. such cross - matching at hiring stage may ensure the entry and presence of professionals with highest integrity and ethical standards in the banking industry. the database almost contains 5000 records of persons terminated / dismissed from banks / dfis on various charges. in my view, 50 percent of the job of the regulator is completed if the right persons are appointed and the corporate governance guidelines are observed in letter and spirit. with such grid of human resources, we foresee a high comfort level to manage the common irregularities, procedural lapses and financial scams in the banking industry. on the other hand prudential regulations and their effective enforcement is one of the vital instruments which help regulator to keep a discipline in financial dealings. these regulations have a significant long lasting impact to safeguard the interest of depositors, ensuring prudence in lending and eradication of unlawful banking practices. ensuring complete compliance of these prudent standards, a strong oversight of functions is inevitable from boards of directors, chief executives and senior management of the banks. state bank of pakistan is comfortable with its cooperation with nab that has strengthened over a period of time. this has also been instrumental in gradually weeding out the irregularities from the banking system, hence facilitated smooth functioning of the banking system. looking to professional zeal, exhibited commitment and deliberations on the subject in this seminar, i am hopeful that the cooperation among sbp, nab & the banking sector would further strengthen and go a long way to combat corruption from the banking industry and the society at large. while the nab is performing its role quite satisfactorily and enjoying the confidence of banking industry i would like to see nab on its way ahead as an organization with indigenous strength of technical staff fully equipped to investigate financial crimes, forensic investigation, having international collaboration with key investigating agencies. i am also confident that nab on its part shall continue to retain the confidence of the banking sector built over the years and achieved through quality, integrity and professionalism of investigator. at the end, i congratulate nab for conducting such a successful | 0 |
us $ 30. 1 billion in 2019. but there are risks to the strong recovery prospects. the emergence of highly transmissible covid - 19 variants could delay the normalization of economic activities. while vaccines have helped lessen severe covid - 19 cases and lower hospitalizations, the reduced efficacy of existing vaccines against more virulent covid - 19 variants may force governments to reimpose stricter lockdown measures to prevent rapid spread of infections. these restrictions, if prolonged, could impede the global economy ’ s recovery in the first half of 2022. 2 / 4 bis central bankers'speeches nonetheless, in the case of the philippines, the timely imposition of quarantine restrictions may help control covid - 19 surges and arrest the spread of the more transmissible omicron variant. on the external front, the ongoing policy normalization by major central banks could affect capital flows and heighten volatility in financial markets. on the positive side, the policy normalization of advanced economy central banks may provide opportunities for economies like the philippines in terms of increased trade activities. we expect the philippine economy ’ s growth trajectory to improve further owing to the projected expansion of exports in 2022. from q1 - q3 2021, goods exports grew by 16. 0 percent owing to the recovery in demand from our major trading partners. electronic products account for more than half of the country ’ s total exports. and we expect exports of electronic products to increase as demand for semiconductors and other electronic components rises owning to more extensive global digitalization efforts across multiple sectors. also lending support to the improved export outlook are higher commodity prices in mineral and agro - based products, and an increase in domestic production capacity. the normalization of the presently highly accommodative monetary policy in advanced economies is expected to cause a rebalancing of global capital flows and depreciation of emerging markets ’ currencies vis - a - vis the dollar. while such a move could potentially affect all emerging economies, the effect on each individual economy will be uneven. our assessment is that the philippines is in a favorable position to navigate this tightening of global financial conditions given its manageable inflation environment and sufficient external buffers. the current level of gross international reserves ( gir ) of usd109 billion is more than sufficient to withstand adverse external shocks. structural flows from overseas filipino remittances, it - bpm revenues, and foreign direct investments can be counted on to further boost | in the latter part of 2021. meanwhile, inflation further eased in december 2021. on an annual basis, inflation for food, 1 / 4 bis central bankers'speeches alcoholic beverages and tobacco, and non - food items continued to slow down in december owing to easing supply constraints. however, prices of electricity, gas, and other fuels further increased amid elevated global prices of crude oil and coal. core inflation, which excludes volatile food and energy prices, likewise declined in december as supply - side price pressures abated. targeted non - monetary measures by the national government helped ease the pressures from supply - side factors. the consecutive quarters of positive year - on - year economic growth point to prospects of sustainable recovery. nevertheless, with recovery still in its nascent stage, the bsp is keen to maintain policy support for the economy. we will properly time our exit strategy as withdrawing support either too early or too late may have undesirable consequences to the economy. to date, the bsp ’ s liquidity - easing measures in response to the pandemic amount to 12 percent of gdp. the prevailing monetary policy stance is supported by a manageable inflation outlook and anchored inflation expectations. based on our latest baseline forecasts, inflation is seen to settle at 3. 4 percent in 2022 and 3. 2 percent in 2023, well within the official target range of 2. 0 to 4. 0 percent. however, risks to the inflation outlook appear to be slightly on the upside for 2022 but remain broadly balanced for 2023. over the near term, major upside risks include increase of global nonoil commodity prices due to strong global demand. additionally, we continue to monitor the developments surrounding typhoon odette to determine if it will have secondary effects on inflation. meanwhile, results of the bsp ’ s survey of private sector economists conducted in december 2021 showed steady mean inflation forecasts at 3. 5 percent for 2022 and 3. 1 percent for 2023. the domestic economy is expected to rebound stronger this year. the interagency development budget coordination committee ( dbcc ) sets its 2022 gdp growth assumption to a range of 7. 0 to 9. 0 percent from 5. 0 to 5. 5 percent last year, taking into account continued recovery prospects as more people get vaccinated and as more businesses rebound from the pandemic. meanwhile, overseas filipino remittances are seen to have reached a new record high of us $ 31. 7 billion in 2021 from | 1 |
though, which perhaps illustrates why that definition is not very useful. graph 1 the net result is that the australian economy has been contracting, though on the best information we have, not at the pace seen in a number of other countries, where quarterly declines in real gdp of 3, 4 or even 5 per cent have been observed in the last quarter of 2008 and are likely to have occurred in the first quarter of 2009. a key dimension through which australia experiences the global business cycle is the terms of trade, a gauge of the income gains or losses that international relative price changes impart to australia. over the five years to 2008, a period of exceptional strength in the global economy, the terms of trade rose by about 60 per cent, equivalent to about 12 per cent of a year ’ s gdp – about $ 140 billion – in additional annual income. it was the biggest such gain in half a century. now, the terms of trade are falling, reversing part, though so far only part, of that earlier gain. i would like to make two points, however, about those terms of trade swings. the first is that, in earlier episodes such as in the early 1950s, and the mid and late 1970s, very large terms of trade movements seriously destabilised the economy. on this occasion, there have been plenty of adjustment challenges – generally coming under the heading of the so - called “ two speed economy ”, where the resource - intensive regions and industries grew quickly and others slowed. but for all that, a floating exchange rate, a much more flexible labour market and better macroeconomic policy frameworks have helped the economy adapt to the terms of trade swings without the degree of instability seen in the past. that is a testament to the arrangements that are now in place. the second point is that, at this stage, the fall in the terms of trade that is occurring does not seem to be reversing all of the previous rise. even with the large falls in prospect for contract prices for bulk commodities, australia ’ s terms of trade look like they could, at the end of this year, still be about 40 per cent higher than the average for the period from 1980 to 2000. perhaps that will not persist. alternatively, perhaps what commodities markets are telling us is that some factors beneficial to australia – foremost the continued likely emergence of china – remain in place. it is probably not entirely coincidental that the clearest signs of a turning point in economic activity appear to be acc | glenn stevens : the road to recovery address by mr glenn stevens, governor of the reserve bank of australia, to the australian institute of company directors, directors luncheon, adelaide, 21 april 2009. * * * the global economy is in recession. virtually all of australia ’ s trading partners are contracting. in fact almost every country with which we would normally make comparisons is in recession, and for many of them it is a bad one. it is very rare for australia to escape an international downturn and there is no precedent for avoiding one of this size. we, like most countries, have trade and financial linkages to the rest of the world. we are all aware of what happens abroad, and our own expectations and economic behaviour cannot but be affected by those events. whether or not the next gdp statistic, due in early june, shows another decline, i think the reasonable person, looking at all the information available now, would come to the conclusion that the australian economy, too, is in recession. 1 these are periods of hardship for significant parts of the community. people lose jobs, businesses fail, loans go bad, and plans are unfulfilled. as such, they are to be avoided if possible and at least ameliorated when they occur. it is for the latter reason that most countries today have extensive social safety nets, so that when recessions do occur, we can avoid the extent of outright misery seen in episodes like the 1930s. policy - makers also seek to cushion such downturns with macroeconomic policy. they are usually more successful if they have managed to restrain the preceding boom. but no country ’ s policy - makers have been able to eliminate the business cycle, much as they have all tried. cyclical behaviour has always been a feature of market economies. it always will be. should you see, at some future time, a claim to the contrary, it would be advisable to treat it with great scepticism and, indeed, as a possible indication that a cyclical turning point is in the offing. most of the time, economic activity expands, as population growth, increasing wealth and aspirations to higher living standards lead to more demand, while a growing workforce, higher productivity and technological innovation push up supply capacity. that is the normal situation for an economy. but every so often – on average about once every seven or eight years, but not regularly enough to predict with accuracy – a set of conditions arises that sees demand weaken for | 1 |
are earmarking a relatively greater share of their fiscal space to build their resilience to physical and transition risks. in parallel, on the funding side, the sustainable bond market continues to develop rapidly. these instruments serve as a catalyst for mobilising capital towards projects that address environmental, social, and governance ( esg ) challenges. the esg debt universe is fast approaching the $ 5 trillion mark, up from $ 3. 4 trillion in 2021. many of you will recall that at the cop 26 in glasgow, governments committed to finance the transition to a greener future. as an international financial centre ( ifc ), we ambition to evolve as a green finance hub for the region as well. 2 / 3 bis - central bankers'speeches in this respect, the bank of mauritius has been very active in promoting the sustainability agenda amongst its regulatees. in june 2021, we released a guide for the issue of sustainable bonds paving the way for the issue of green and sustainable bonds in mauritius. we also established our climate change centre in october 2021 and in june 2022, the guideline on climate related and environmental financial risk management was issued. in the area of reserves management, we have also embedded sustainability considerations in our internal investment strategy. in the journey that we are charting for mauritius as an ifc of choice in sustainable finance, banks – locally and regionally – will have a critical role to play. i would here make an appeal to all banks not to shy away from exploring opportunities on this new trajectory and join us in creating more depth and breadth for sustainable and esgrelated finance for our continent. i also wish to take this opportunity to make a call on all african central banks and nonbanking financial services regulators to join hands in the region in creating the appropriate regulatory regime to support the development of sustainable finance in the region. ladies and gentlemen, proper management of sovereign debt requires cross - fertilization of sound policies and discipline from related policy areas, including fiscal and monetary policy. i have no doubt that the topics on the agenda for this 2 - day workshop will spark enriching and interactive exchanges and promote further dialogue amongst relevant stakeholders. i understand that more than 200 delegates are joining us virtually from many parts of the world as well. i look forward to collaborating with the oecd on such workshops of high pertinence to our region in future. before finishing, i would like to thank the members of the governing board and the staff of the regional centre of excellence | harvesh seegolam : remarks - launch of the regional centre of exellence workshop remarks by mr harvesh seegolam, governor of the bank of mauritius, at the launch of the regional centre of excellence workshop on sovereign debt management, sustainable bonds, and debt transparency, ebene, 26 july 2023. * * * dr the honourable renganaden padayachy, minister of finance, economic planning and development the honourable mahen kumar seeruttun, minister of financial services and good governance members of the diplomatic corps mr carmine di noia, director for finance and enterprise affairs, oecd the first deputy governor of the bank of mauritius and chairperson of the financial services commission the second deputy governor of the bank of mauritius members of the governing board of the regional centre of excellence board directors of the bank of mauritius and of the financial services commission chairpersons and chief executive officers of para - statal bodies and other authorities chief executives of banks and financial institutions members of the media ladies and gentlemen distinguished guests all protocol observed i wish you all a very good morning and a warm digital welcome to those who are joining us online. i am pleased to join you this morning for this workshop on sovereign debt management, sustainable bonds and debt transparency, representing the 12th workshop organised by the rce since its establishment. ladies and gentlemen, the theme of this two - days'workshop is indeed very timely. moreso, that it comes at a moment where most countries are rethinking their debt strategies. the global economy is still recovering from the onset of the covid - 19 pandemic ; the energy and food crisis ; the challenges associated with climate change ; and the geopolitical tension associated with the war in ukraine. talks about the way forward regarding sovereign debt have been in the limelight, especially when we bear in mind that the first casualty of this polycrisis, has been the sovereign debt situation of countries globally. against a backdrop of rising interest rates, capital outflows, stalling growth, plummeting currencies and increased frequencies of natural catastrophes, the debate about which direction to take regarding the future of sovereign debt has never been so pertinent. to do justice to the debate, however, we need to re - cast debt using an appropriate and well - balanced context. not all debt is malignant! 1 / 3 bis - central bankers'speeches taking a stroll down memory lane, one cannot be oblivious of the | 1 |
almost 5 percent and reached a 14 - year high as financial markets assess the implications of a possible large fiscal stimulus for economic growth, inflation and the level of outstanding us government debt. ten - year government bond yields have increased by 40 basis points in new zealand ( figure 8 ). figure 8 : 10 year government bond yields 4. 5 % differential ( rhs ) nz us 4. 0 3. 5 bps 3. 0 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 jan - 15 may - 15 sep - 15 jan - 16 may - 16 sep - 16 source : bloomberg, rbnz the factors behind the rise in us rates have increased market expectations that the federal reserve will raise policy rates at its meeting on 13 - 14 december 2016, and tighten more rapidly in 2017. prospects of stronger growth in the us and the resulting spillovers through trade, commodity prices and relative exchange rate movements should be positive for new zealand and a welcome development from a monetary policy perspective. however, while the 5 percent appreciation in the us dollar in recent weeks is helpful for new zealand exporters, the twi currently lies above its level in june 2015, despite the terms of trade being 6 percent lower and seven reductions in the ocr. as has been the case in several other countries, monetary policy has been made more challenging in new zealand by low global inflation and zero or negative policy rates in several major economies. this has put downward pressure on our interest rate structure and contributed to asset price inflation and upward pressure on the new zealand dollar. this trend may finally be turning. another major change is the 7. 8 strength kaikoura earthquake. early indicators are that reconstruction work, including by government, could be in the order of $ 3 – $ 8 billion, or around 1 - 3 percent of gdp. this is much smaller than the $ 40 billion associated with canterbury reconstruction, and would occur at a time when the domestic economy is at or near full capacity. the supply disruptions are unlikely to have a major impact on overall economic growth. some increase in construction cost inflation is likely as this is already running at 7. 9 percent in auckland and 6. 3 percent nationally due to capacity bottlenecks within the sector. increases in freight costs are also expected. at this stage these developments do not cause us to change our view on the direction of monetary policy as outlined in the november mps. we expect monetary policy to continue to be accommodative, and | access to credit for households and companies is tightened even without the riksbank having raised the interest rate. the fact that it is more expensive and more difficult to borrow affects economic activity. in a situation where the markets are affected by uncertainty, it is also possible that the interest rates faced by the general public do not follow suit when the riksbank cuts the repo rate. one can say that the repo rate then becomes a blunter instrument than normal and that its impact is weaker. such a situation could therefore require more powerful adjustments to the interest rate than would otherwise have been necessary. measures to ensure the financial system functions more normally it is thus very important from several aspects that the financial system functions well. and it is the riksbank ’ s task, as written in law “ to promote a safe and efficient payment system ”. this means in practice that the riksbank regularly analyses risks and threats to the stability of the swedish financial system. the purpose is to detect changes and vulnerabilities that can lead to a serious crisis and in various ways to prevent such a situation from arising. we also maintain a good level of crisis preparedness and carry out different types of crisis exercise. this means that we are well prepared to act if a situation arises whereby stability is threatened. when shocks occur in the financial system we have different tools for managing the situation. an important part of this is providing information, highlighting risks and conducting a dialogue with financial market participants. the riksbank also has the possibility to supply the system with liquidity or to provide liquidity to financial companies under the supervision of finansinspektionen, the swedish financial supervisory authority, that are solvent but lack sufficient liquidity to manage their payments. this gives the riksbank a central role in a financial crisis situation which is often connected with this type of problem. it is usually said that the riksbank can in such cases act as lender of last resort. other authorities working with these issues in different ways are finansinspektionen and the swedish national debt office. as those of you here are well aware, the riksdag and the government also contribute. this can be by formulating legislation and regulatory frameworks, or by intervening with measures in those cases where those of the authorities do not suffice. one example is the stability plan for the financial system decided by the riksdag just over two weeks ago. this was a measure that the riks | 0 |
making the financial system safer and fairer remarks by michael s. barr vice chair for supervision board of governors of the federal reserve system at the brookings institution washington, d. c. september 7, 2022 thank you, david, and thank you to the brookings institution for the invitation to speak to you today. 1 on july 19, i had the honor of being sworn in as the vice chair for supervision of the board of governors of the federal reserve system. this job was created after the global financial crisis to lead the fed ’ s work overseeing the safety and soundness of banks and in support of its financial stability mandate. in the 12 years since then, great progress has been made in strengthening the banking system, and in strengthening oversight. i look forward to building on that work by helping to make the financial system safer and fairer, in support of an economy that serves the needs of households and businesses. on behalf of those who may wonder what “ building on that work ” means, i will speak about some of my near - term goals and how i will approach achieving them. starting with that word “ building, ” which to me means more than just “ maintaining. ” success in financial regulation and supervision does not mean standing still because finance does not stand still. the regulatory and supervisory framework adopted after the crisis recognizes that innovation and change are constant in finance, that our understanding of existing and emerging risks can and should deepen over time, and that regulation and supervision must evolve to be effective. many issues at the forefront of banking regulation today were not prominent five years ago, and some of them scarcely even existed. “ building ” means staying ahead of changes, evaluating how banks are managing risks, and making the financial system safer and fairer for households and businesses. when i say that one of my top goals is to make the financial system safer, it is because keeping it safe involves an active and never - ending effort to analyze risks and make necessary i am grateful to laura lipscomb of the federal reserve board for her assistance in preparing this text. the views expressed here are my own and do not necessarily reflect those of the federal reserve board or the federal open market committee. - 2adjustments. there is no responsible alternative to this approach because the stakes are far too high to do otherwise. the global financial crisis caused a terrible recession and brought the united states to the brink of an economic collapse that could have been worse than the great depression of the 1930s. a significant cause was | ##er for households and businesses. as i said at the outset, i believe these goals are related and mutually reinforcing, so that progress in one area will advance efforts in the other. i have discussed a number of specific issues to illustrate these principles, but i ’ ll have more to say about these ideas, and other important reforms, in the coming weeks and months. thank you. | 1 |
daniel k tarullo : the present and future of community banking speech by mr daniel k tarullo, member of the board of governors of the federal reserve system, at the federal reserve bank of new york community bankers ’ conference, new york, 8 april 2010. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system ’ s website. * * * these are difficult times for many community banks, a reflection of the difficult times for the many workers and businesses across the nation who depend on the loans provided by your institutions. this morning i will address some of the problems that you currently face and offer a few thoughts about the future of community banking. before doing so, however, i thought it would be useful to explain my perspective on the federal reserve ’ s monetary policy posture, which will obviously have great significance for the economic environment in which community banks will be operating. specifically, i want to speak about what has become known as our “ exit strategy ” – that is, the means by which the federal reserve will bring to an end the extraordinary lending and monetary policies that it adopted in response to the financial crisis. planning and implementing an exit strategy in thinking about an exit strategy, it is important to distinguish between two types of policies that the federal reserve adopted, beginning in 2007 and continuing thereafter, beyond its sharp reductions in the target for the federal funds rate. first, the federal reserve created a number of liquidity programs, which provided well - secured, mostly short - term credit to various parts of the financial system that were under increasingly severe strains. among these were the term auction facility ( taf ), which auctioned short - term funds to banks ; the primary dealer credit facility, which served as a backstop liquidity provider for securities firms ; the term asset - backed securities loan facility ( talf ), which was designed to help revive the market for asset - backed securities, and others. second, and separately, the federal open market committee ( fomc ) undertook large - scale purchases of treasury securities, agency mortgage - backed securities, and agency debt. this unconventional monetary policy action was taken because the fomc, after having reduced short - term interest rates nearly to zero, determined that the severity of the economic downturn made additional stimulus necessary. in addition to improving conditions in mortgage markets, these asset purchases helped lower yields on long - term debt ; they also substantially increased the level of reserve balances that depository | their costs, are a good hedge against sharp movements in capital flows. although most economies did not significantly deplete their reserves during the crisis, their sole existence prevents destabilizing capital movements from occurring. on the other hand, the forex intervention mitigates exchange rate adjustments. as we have said before, without the intervention the peso would have appreciated further. still, it is worth pointing out that the appreciation of the chilean peso is not so different from that of the currencies of a large group of emerging or commodity - exporting economies, whether they have intervened their exchange rates or not. let me insist that the forex intervention has only transitory effects. it cannot permanently modify an economy ’ s competitive position. this can only be made with policies that affect the real side of the economy. monetary or forex measures can only have a temporary influence. the impact of a sterilized exchange rate intervention occurs via the currency portfolio composition. because external and internal financial assets are not perfect substitutes, changes in their relative supply have an initial effect on prices, which then fades over time. the imf ’ s latest regional economic outlook for the western hemisphere presents estimates showing that interventions reduce the rate of currency appreciation. additionally, it indicates that the effects are milder in more financially open economies, and shows that rule - based or discretional interventions have similar effects. ours is rule - based, in order not to lose control over our monetary policy. as proven by this evidence, the effects would not be so different if our intervention had been arbitrary. this comes as no surprise, since the effects depend on both the amount of the intervention and the composition of the currency portfolios. it has called the attention of many people that a measure similar to that of 2008 has caused a different behavior of the exchange rate. i don ’ t need to say that the combination of events has also been different, especially abroad. back then the world economy was headed to a severe crisis and risk aversion was growing. this eroded asset value in emerging economies and strengthened the dollar. copper prices and terms of trade began to decline. today the picture is quite different : the dollar is weaker than ever and the copper price has remained very high, and is forecast to stay near its present levels for some time ( figure 8 ). another issue regarding exchange rate ’ s discussion has to do with the effects of capital flows. several emerging economies have seen their capital inflows increasing, which has added | 0 |
will have real economy implications. in addition, the interest rate benchmarks that monetary policy sets will directly impact the cost of leverage and the volume of credit exposures. obviously, the use of one policy lever ( in this case, policy interest rates ) would not always be able to address – at the same time – two policy objectives ( price stability vs. financial stability ) without conflict. hence, the use of enhanced policy tool kit and policy coordination are imperative. to operationalize all these at the bsp, we have recently created the bsp financial stability committee ( or fscomm ) in addition to the bsp advisory committee ( which recommends monetary policy to the monetary board ). from the five items i enumerated earlier, it is clear that financial stability crosses the three pillars of central banking. to close that “ divide ”, the fscomm is set at the highest level at the bsp, with the main committee manned by the three deputy governors and 3 of the most senior officers of the bsp … i have the pleasure of directly overseeing this committee. closing remarks : market conduct ensures reform success i have given you some of the guideposts, or mile markers on the road to financial stability – as we see it in the bsp. the bsp can put out regulations and create the enabling regulatory environment … but, after everything is said and done, it is the market that will execute transactions. a wise man once warned that when dealing with the market, one should anticipate that it is not so much about the destination, as it is about the ride itself. financial targets tell us where we want to go but it is risk - taking and risk management that get us there. no doubt, the ride can be enjoyable and give you a high, but if you don ’ t manage the risks well, then you – dragging everyone else with you – might end up in one big traffic jam, if not in the gutter. ladies and gentlemen, i am not about to ask everyone here – for lack of a better term – to “ behave ” … as michael corleone said to sonny, “ it ’ s not personal, it ’ s strictly business. ” acceptable behaviour is a given because that is what collective responsibility requires. and our collective responsibility are prudential concerns. turned on its head, prudential concerns are our collective responsibility because the gains ( as well as the losses ) are always shared. this applies as much to the cash market, | to the foreign exchange market, to securities underwriting and brokering, to trusts and other fiduciary activities and certainly to banking. i therefore ask the organizations and institutions here tonight, let us effectively partner with one another because... the stakes are far too great for the bottom line of any single balance sheet … the stakes far outweigh the high of the ride …. ladies and gentlemen, we are in this together. bis central bankers ’ speeches | 1 |
directly or indirectly. the oenb is responsible for implementing the eurosystem ’ s monetary policy operations in austria, and for providing emergency liquidity assistance to banks based in austria. as an expert organization, it provides a high degree of know - how, comprehensive analyses and high - quality data for the ecb and for the oenb ’ s partner organizations in austria. in addition, the oenb plays a direct role in safeguarding financial stability in its capacity as the national banking supervisor. the know - how of the ecb and of the national central banks of the eurosystem and their capacity to act are crucial for the smooth functioning of the money and financial system. this is even more true in crisis situations, such as we witness at present. the instruments of central banks are the more effective the better they are integrated in a comprehensive macroeconomic strategy, alongside fiscal policy measures. using those instruments to take concrete economic and monetary policy action presupposes the existence of strong institutions with a pronounced capacity to act, which the oenb has got. in times like these, the oenb ’ s capacity and know - how are of particular importance, and we are well aware that we have a big responsibility to meet. ladies and gentlemen, allow me to draw a simile to conclude : to excel in central banking, we need to have the courage to rush in like firefighters, and we need to be as vigilant as policemen. right now we are busy fighting a large fire that has spread across the world ; and i would say we have been doing a good job in getting the fire under control. at the same time i can assure you that we have seen to it that money and lending market operations continue to run smoothly, and that we promote the resumption of sustainable growth and preserve price stability. this brings me to the end of my introductory remarks. to conclude, i look forward to having a day and a half with you to discuss these critical and timely issues of economic policy from a multitude of perspectives. i hope you will find our economics conference a useful and an insightful event. | high degree of independence from political influence, which supports them in reaching the goal of maintaining price stability. their main policy instrument is the key interest rate or, in other words, the rate at which credit institutions may borrow from them. in addition, central banks are responsible for safeguarding the stability of the financial system. the key channel for meeting this responsibility is the provision of liquidity to the banking sector. central banks stand ready to use both types of instruments in times of crisis. in response to the current crisis, the traditional monetary policy instruments have, indeed, been used widely. since last october, the ecb has lowered its key interest rate by a total of 325 basis points. at the same time, the eurosystem has also widely used its framework of liquidity - providing instruments. moreover, this framework has been expanded to include instruments that would not be typically used under normal circumstances, such as the provision of liquidity with a maturity of up to one year, or the provision of liquidity in foreign currency ( such as u. s. dollar and swiss franc ) in the form of swaps with the federal reserve system and other central banks. both measures – interest rate policy measures and liquidity - providing measures – have helped ease tensions in the interbank lending market and have been instrumental in meeting the challenge of safeguarding the stability of the financial system. at the same time, i would like to stress that both types of measures are compatible with the ecb ’ s price stability objective, as both inflationary pressures and inflation risks have decreased substantially in the course of the crisis. any concerns that the current monetary policy stance may push up inflation in the time ahead are, therefore, unfounded. neither short - term inflation expectations nor forecasts of the degree of capacity utilization ( output gaps ) in the real economy, and neither credit growth figures nor money supply measures are, at present, signaling inflation risks. it goes without saying that we are closely monitoring developments to be able to take action fast, if need be. in the near term, we see some signs that price levels might go down in individual euro area countries, which we interpret as an unwinding of increases seen last year in an environment of soaring energy prices. the producer price index for the euro area, in fact, dropped by 3. 1 % from march 2008 to march 2009. let me stress, however, that over the medium term i see neither the risk of deflation, nor the risk of inflation. | 1 |
learning to ensuring that graduates acquire these competencies. the theme for the silver jubilee commemoration is “ celebrating 25 years of excellence in the footsteps of the uganda martyrs ”. one of the lessons we can draw from the life of the uganda martyrs is the value of believing and adhering to what you consider the truth and the right way and sticking to this principle, no matter the cost. this is even more instructive for you who are fortunate to be educated in a faith - based institution like umu nkozi where values such as honesty and integrity are so important. my second issue is that of the changing global economy in which our graduands will be starting their careers. we are now in an era that has been labeled by such entities like the world economic forum as the “ fourth industrial revolution ”, characterized by artificial intelligence and the advent of robots. in a nutshell, this fourth industrial revolution means that human effort in a growing number of processes is being complemented and, in some cases, replaced, by computing power and robots. for example, drones are delivering blood units to hospitals and parcels in far distant places where previously human beings would have been needed to do the job. you will have heard of the driver - less vehicles or even the virtual assistants deployed in customer service centres. this digital revolution has implications for the form of training we give our students and the type of jobs that will be applicable. one of the implications of this fourth industrial revolution is that the speed of change is very high in the business world, and this means that the skills required of employees can rapidly change. also, low skill white collar jobs are being eliminated by automation. the rapid change in skills needs and plausible loss of jobs to automation means that competition for available employment opportunities will be more intense. for instance, a large number of services which were known as non - tradable have become tradable because of technology, and this has implications for protection of jobs which hitherto faced competition only within one geographical jurisdiction. graduands therefore must be keen to take advantage of the various development programs and financing schemes instituted by the government of uganda to create their own jobs. another consequence of the fourth industrial revolution is that learning new skills may become a permanent and indispensable feature of a successful career. the importance of continuous learning was put succinctly by alvin toffler, “ the illiterate of the 21st century will not be those who cannot read and write, but those | be taken purely on commercial criteria, without being distorted by the provision of cheap credit or other forms of finance from the government. government induced distortions in financial markets will lead to the misallocation of resources, reducing the social rate of return to these resources. modernising smallholder farming will entail smallholders making greater use of purchased farm inputs. hence modernisation will require smallholders having better access to finance. nevertheless finance is unlikely to be the binding constraint on modernisation of smallholder agriculture and unless more important constraints are tackled, enhancing smallholders ’ access to finance will be ineffective. policy measures to strengthen the provision of financial bis central bankers ’ speeches services in the rural areas must be part of a much broader set of interventions to support smallholders to adopt modern farm technology and produce for the market, of the type i have already mentioned. unless smallholders have adopted good agricultural practises, such as the use of improved seeds, proper field preparation, timely planting, weeding and pest control, proper harvest and post - harvest handling, etc – practises which can improve yields significantly – they will not be able to utilise credit effectively because their farms will not be profitable. how should government support the development of rural financial markets? the key interventions required are to alleviate the market failures which impede the delivery of financial services to farmers. for example, it is necessary to strengthen the institutional environment for loan security to reduce the credit risks of lending to farmers. strengthening land rights to allow farmers to use land as loan collateral would help to make farmers more creditworthy. the proposed establishment of a collateral securities registry and the enactment of the chattel securities bill, which is currently before parliament, will help to widen the range of assets which are acceptable to lenders as collateral. promoting the warehouse receipt system set up by the uganda commodity exchange would also be a useful measure to support lending to agriculture. microfinance institutions ( mfis ) and savings and credit cooperatives ( saccos ) are much better suited institutionally than commercial banks to serving small farmers, but they are often constrained by managerial and technical weaknesses. hence there is an important role for government to assist mfis and saccos to strengthen their management and the professional skills of their officers. the bank of uganda is encouraging the larger tier 4 mfis to upgrade to become licensed deposit taking mdis. assisting mfis and saccos to strengthen their technical and managerial capacities so that they can mobilise funds from the | 0.5 |
the new challenges would include data capture, data curation, search, sharing, storage, transfer, information privacy, analysis of data, etc. while bd throws up these challenges, the use of bd analytics in a meaningful way would offer a significant competitive advantage. implementation of appropriate bd analytics by banks is going to be the key in achieving greater customer centricity and for acquiring a deeper understanding of customer needs given the proliferation of customers ’ external data, such as, social media activities and online behavior. rather than being dazzled by the volume of data, banks should be in a position to convert it into 3 i ’ s of insights, innovations and income. business analytics 22. as we anticipate challenges of bd, there would be emerging technology and skill to deal with the bd in a meaningful way. business analytics ( ba ) is one such field which can be used by banks to further their business interest in the increased it environment. ba in general refers to the skills, technologies, practices for continuous iterative exploration and investigation of past business performance to gain insight and drive business planning. business analytics can hold the key to better performance, informed decisions, actionable insights and trusted information. by bringing together all relevant information in an organization, banks can answer fundamental questions, such as what is happening? why is it happening? what is likely to happen in the future? and how should we plan for that future? data and analytics provide very big opportunities for banks. at some level, actually, one can think of it as a way to transform the institution, much the same way in the 1980s and 1990s and early 2000s when it systems transformed the banks in their business processes. bis central bankers ’ speeches internet of things ( iot ) 23. we are already in the era of ever increasing internet of things ( iot ). iot describes a world where just about anything can be connected to communicate in an intelligent fashion. one study says world today has 15 billion connected devices and in the next five years the number may go up to 50 billion. in other words, with the iot, the physical world is becoming one big global information system. for banks the iot will deliver an unprecedented level of data and data - driven customer insight. this will allow banks to provide their customers a truly bespoke experience with insights, advice, and offers that reflect the day - to - day events in customers ’ lives. the iot is the key factor that will enable a | this area of work so that the work of these organizations can complement each other for the benefit of all countries in the region. i understand that this co - operation already exists and i would like to take this opportunity to encourage its expansion. it is also important to continue having dialogue between the regions ’ private and public sectors as we continue driving this common agenda. this will ensure that both the public sector policy makers and private sector implementers move in tandem. without overemphasising the point, capacity building should be a key pillar of this dialogue. i hope that esaamlg will be able to initiate such dialogue at an appropriate time. those of us in the financial sector stand ready to participate in such an initiative. at this juncture, it would be important to recognise the esaamlg ’ s cooperating nations and organisations for their supportive role in capacity building in the region. i would like in particular to acknowledge governments of the united states and united kingdom, the united nations office on drugs and crime, the world bank and the imf. it is my expectation that they shall remain engaged as esaamlg continues to spearhead the development of an enabling aml / cft legal and regulatory framework in the region. as i wind down my comments, i urge you to take some time to enjoy the beautiful beaches and warm hospitality that mombasa offers. there is indeed a swahili saying that translates as “ getting into mombasa is easy, the hard part is getting out ”. so if you find yourself wanting to extend your stay here, do not be surprised. kenya, of course, offers much more including the acclaimed “ seventh wonder ” of the world, the maasai mara which is currently experiencing the spectacular annual migration of wildebeest from the serengeti in tanzania. as you embark on your meeting over the next few days, i wish you very fruitful deliberations. do enjoy the evening and, indeed, your entire stay in mombasa. it is now my pleasant and honourable duty to declare the 16th esaamlg task force of senior officials officially open. | 0 |
##ness and stability, as it resides within a financial trajectory underpinned by the forces of shari'ah injunctions. these shari'ah injunctions interweave islamic financial transactions with genuine productive activities and prohibit involvement in illegal and unethical activities. this intrinsic principle of governance contributes towards insulating the islamic financial system from the potential risks of financial stress triggered by excessive leverage and speculative financial activities. indeed, the islamic financial system derives its strength and stability from its faculty to uphold shari'ah principles. this demands the internalization of shari'ah principles in islamic financial transactions, in its form, spirit and substance. this epitomizes the objectives of the shari'ah in promoting economic and social justice. to achieve this objective, the islamic financial regulatory and supervisory regime must always ensure shari'ah compliance. integral to this process is the success in achieving " unity in diversity " of the interpretations of shari'ah injunctions in the realm of finance. in this regard, the islamic financial services board aims to strengthen the current initiatives to achieve a greater degree of convergence and harmonization. ladies and gentlemen : a greater understanding of islamic banking and finance on the international front would contribute towards our efforts to reinforce the on - going international initiatives towards fostering greater global financial stability. in this regard, the participation of other financial supervisory and regulatory authorities, and other international standard setting organizations would facilitate this process to achieve our shared interest of preserving the soundness and stability of the islamic financial system. ladies and gentlemen : it has been said that islamic banking and finance is a " mirror of the sea " for until and unless we have the courage to explore its depth, we would never be able to uncover the treasures that reside within. islamic banking as a new sphere of finance promises vast opportunities and benefits for all. its integration into the global financial system will contribute towards achieving our shared aspirations for financial stability to ensure balanced growth in the global economy. | of the crisis have made a crucial contribution to restoring financial stability. given the depressed economic conditions and various challenges that have emerged, we, at the bank of mauritius, are expected not to lose sight of financial stability while formulating policies ; it ’ s a dragon that we cannot afford to leave out of our policy calculations. soundness and robustness of banks as well as financial stability are not a novel policy concern for mauritius. mauritius is one of the rare countries in the free world that has known free banking in the 17th and 19th centuries. bank failures were as common a feature in mauritius as in the us and elsewhere. a few years after independence in 1968, more specifically after the breakdown of the bretton woods system in september 1971 that had rendered the international monetary system unstable, the bank established a division that eventually evolved into what is known today as the bank supervision department. its objective was and still is to regulate banks and ensure financial stability. the bank has hitherto not lost sight of the critical importance of financial stability to the economy. we have a bank - centred financial system. total assets of our financial system are currently estimated at around 385 per cent of gdp. the banking sector alone accounts for around 300 per cent of gdp which goes to say that banking accounts for 80 per cent of the total assets of our financial system. total assets of the most domestic systemically important bank in the country are nearly 70 per cent. the assets of the insurance sector are equivalent to 33 per cent of gdp while those of the pension sector stand at 25 per cent of gdp. the non - bank deposit taking sector, inclusive of leasing companies and finance companies, have assets equivalent to 16 per cent of gdp. these ratios suggest that the importance of banks in our financial system cannot be understated. if government ever had to bail out banks in order to protect the economy from collapsing, our debt - to - gdp would fly through the roof. it goes to say that regulation and supervision of banks is a function of the bank of mauritius that cannot be taken lightly and politicians should stay out of the regulatory and supervisory arena. in particular, licensing of financial institutions should be free of political influence in the first place. however effective and robust the regulatory and supervisory framework in place, banks do fail. and they fail due to a variety of reasons. there is no magic elixir that grants immortality to banks. in the last 46 years, the bank of mauritius revoked the banking licences of five banks. the funeral list | 0 |
per annum ( since the mid - 1990s ), in practice the bank adopted a relatively flexible approach where these guidelines were indeed treated as guidelines only. a further guideline for growth in total bank credit extension of around 10 percent was also adopted. but when these guidelines were exceeded by considerable margins, this was on occasion tolerated without strong policy adjustments, on the basis of developments in other variables. in practice it was quite apparent that growth in the money supply could sometimes be a misleading indicator of current and future inflation. accordingly, a number of other variables were also analysed in deciding upon the appropriate monetary policy stance. these included the pace of growth in the banking sector ’ s credit extension, movements in consumer price and production price inflation, domestic production and expenditure, the balance of payments and exchange rate situation, and the fiscal policy stance. the inflationary potential of developments in all these and many other variables was assessed on an ongoing basis. accordingly, growth in money supply was not really the pivotal variable around which monetary policy revolved - although excessive growth in money supply certainly did signal the need for additional caution. however, money supply growth was deemed to be important and was formally recognised as the intermediate target variable. what has since changed? instead of targeting guidelines for intermediate objectives, the reserve bank now directly targets inflation. it monitors and analyses a whole range of factors that can affect the rate of inflation. the inflation rate, or more specifically cpix, which is the headline consumer price index excluding mortgage costs, has to fall between 6 and 3 percent by the end of the calendar year 2002. it is within this target and this monetary policy framework that the south african reserve bank will strive to achieve in the short term what we are mandated to do : that is to achieve price stability. such a framework for monetary policy ensures that monetary policy is transparent, in that the authorities have a definite and measurable aim in their conduct of monetary policy. and at the same time, it should give the citizens of this country an aspect of clarity about the future as it makes clear the bank ’ s intentions. in so doing, inflation targeting should also ease the burden and take the " guesswork " out of many of the decisions that businesses have to make when planning for future expansion and investment. it should also provide an anchor for inflation expectations and guide both employers and employees when undertaking forward - looking negotiations. however, it must be emphasised that at least some of the success of the inflation targeting framework rests on whether it is fully | strike a balance. full disclosure is neither possible nor desirable. sensitive information must remain confidential, as it could endanger financial stability if revealed. the third pillar is to ensure the legality of supervisory action. there are two elements to this. the first is that there are concerns that tensions could arise from having monetary policy and supervision under one roof. in my view, the clear delineation of mandates in the legal framework and the functional separation of the policy areas mitigate such risks, and i pledge to ensure that the separation principle is fully respected. it ’ s worth 1 / 2 bis central bankers'speeches remembering that a system - wide perspective is the key advantage of european banking supervision, as it allows us to identify and react to euro area - wide linkages and spillovers. applying national laws, on the other hand, can lead to a fragmented implementation of supervisory rules. the second element is that we have to act within the boundaries of our mandate and respect the law at all times. any supervisory action must remain bank - specific and be taken within the limits of relevant european legislation, which is defined by the co - legislators, i. e. the european parliament and the council, with further specifications from the european banking authority. i look forward to answering your questions. 2 / 2 bis central bankers'speeches | 0 |
higher capital better for banking system and nz notes from an address delivered to business nz ceo forum in auckland on 30 november 2018 by adrian orr, governor 2 the terrace, po box 2498, wellington 6140, new zealand telephone 64 4 472 2029 online at www. rbnz. govt. nz the reserve bank is tasked with ensuring the banking system is both sound and efficient. to achieve our task we have a range of tools ( see table 1 ). the most important tool in our kit is ensuring banks hold sufficient capital ( equity ) to be able to absorb unanticipated events. the level of capital reflects the bank owners ’ commitment – or skin in the game - to ensure they can operate in all business conditions, bringing public confidence. given its importance, we have been undertaking a review of the optimal level of capital for the new zealand system. we conclude that more capital is better. we are sharing our work with the banking sector and public, and expect to hear one side of the story loud and clear, that capital costs banks. we need to hear a broader perspective than that, to best reflect new zealand ’ s risk appetite. what have we done in practice? the reserve bank needs to ensure there is sufficient capital in the banking “ system ” to match the public ’ s “ risk tolerance ”. this is because it is the new zealand public – both current and future citizens - who would bear the social brunt of a banking mess we know one thing for sure, the public ’ s risk tolerance will be less than bank owners ’ risk tolerance. how do we know this? surely the more capital a bank has the safer it is and the more it can lend. why don ’ t banks hold as much capital as they can? first, there is cost associated with holding capital, being what the capital could earn if it was invested elsewhere. second, bank owners can earn a greater return on their investment by using less of their own money and borrowing more - leverage. and, the most a bank owner can lose is their capital. the wider public loses a lot more ( see figure 2 ). hence, we need to impose capital standards on banks that matches the public ’ s risk tolerance. we have been reassessing the capital level in the banking sector that minimises the cost to society of a bank failure, while ensuring the banking system remains profitable. ref # 7821869 v2. 0 the stylised diagram in figure 3 highlights where we | oil and commodity prices which have also been buffeting the economy ) and taking into account the underlying structure of the euro area economy. one question that could arise here is whether the massive injections of liquidity into the banking system come at the price of either an inappropriate monetary policy stance or a less than optimal signalling of it. in practice, this is very unlikely to be the case. indeed, since the beginning of the financial turmoil in august 2007, the ecb has repeatedly emphasised that the policy stance is defined in terms of the interest rate at which financial intermediaries can obtain liquidity, rather than by fixing the quantity of liquidity which is provided. as early as 1970, william poole's classical analysis of the instrument - choice problem taught us that using the interest rate as policy instrument is desirable when short - term uncertainty stemming from instability in the money multiplier or from money demand shocks is high relative to the uncertainty stemming from aggregate demand shocks. the provision of liquidity then becomes an endogenous variable as it is steered in order to stabilise the money market rate at its desired level. in this framework, the sometimes substantial liquidity injections by the eurosystem should be seen as simply offsetting the sudden and sharp declines in the money multiplier induced by the financial crisis. as far as our monetary policy decisions are concerned, they depend on our medium - term assessment of the risks to price stability and are based on our two - pillar strategy, which enables us to cross - check developments in the money, credit and financial markets with the signals provided by economic analysis. given existing upward inflationary pressures from oil and other commodity prices and the associated likelihood of second - round effects, euro area monetary policy was until recently faced with predominantly upward risks to price stability. however, as the financial crisis intensified further, financial conditions for the private nonfinancial sector have tightened – independently of monetary policy – and the supply of credit from financial institutions might be reduced. as a result, expectations regarding economic activity have rapidly deteriorated over the last two months and the upward inflationary pressures have eased, partly as a result of lower commodity prices but also because of the change in the outlook for domestic economic activity. therefore, the coordinated interest rate cut of 50bp last week was also the appropriate response for the euro area to the materialisation of previously identified downside risks to growth and the associated decline in the upward risks to price stability. for the near future, we will continue | 0 |
lorenzo bini smaghi : three questions on monetary policy easing lecture by mr lorenzo bini smaghi, member of the executive board of the european central bank, at the university of ancona, ancona, 6 march 2009. * 1. * * introduction 1 it is a pleasure to be at the university of ancona and to be able to deliver this lecture. thank you very much for the invitation. when preparing this lecture, i found myself thinking about the speech i gave in october 2006. at that time, central banks worldwide were raising interest rates, so i thought it would be useful to consider the key challenges that monetary policy faced in a tightening phase. i asked the following three questions : when to start tightening monetary policy? at what speed to tighten? and when to stop tightening? circumstances have changed. now, central banks worldwide are lowering interest rates. so we could ask the same questions, but just change one word : when to start easing monetary policy? at what speed? and when to stop easing? today i would like to share with you some thoughts on these three questions. in theory, the answers to the three questions should be simple. a loosening phase begins – and the interest rate should be cut – when downward risks to inflation prevail. the interest rate should be cut at a pace necessary to ensure price stability in the medium term. finally, the easing phase should end when upward risks to inflation become dominant again. in the euro area, the downward or upward risks to inflation refer to the ecb ’ s definition of price stability, which is less than, but close to, 2 %. this may sound easy, in theory. in practice, how do you decide if upward or downward risks to inflation predominate? there is no silver bullet, no single indicator and no single model that can do the job for monetary policy - makers. any modern central bank looks at a variety of indicators, at a variety of models, and uses careful judgement to reach a firm view concerning risks to price stability. at the ecb, as you know, we find it useful to organise the analysis of risks to price stability on the basis of two complementary perspectives. first, in what we call the “ economic analysis ”, we assess the short to medium - term determinants of price developments. the focus is on real activity, price indexes and financial conditions. the second perspective, the “ monetary analysis ”, focuses on the medium to long run. here | daniel k tarullo : regulatory restructuring testimony by mr daniel k tarullo, member of the board of governors of the us federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 23 july 2009. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system ’ s website. * * * chairman dodd, ranking member shelby, and other members of the committee, i appreciate the opportunity to discuss how to improve the u. s. financial regulatory system so as to contain systemic risk and to address the related problem of too - big - to - fail financial institutions. experience over the past two years clearly demonstrates that the united states needs a comprehensive strategy to help prevent financial crises and to mitigate the effects of crises that may occur. the roots of this crisis lie in part in the fact that regulatory powers and capacities lagged the increasingly tight integration of conventional lending activities with the issuance, trading, and financing of securities. this crisis did not begin with depositor runs on banks, but with investor runs on firms that financed their holdings of securities in the wholesale money markets. an effective agenda for containing systemic risk thus requires adjustments by all our financial regulatory agencies under existing authorities. it also invites action by the congress to fill existing gaps in regulation, remove impediments to consolidated oversight of complex institutions, and provide the instruments necessary to cope with serious financial problems that do arise. in keeping with the committee's interest today in a systemic risk agenda, i will identify some of the key administrative and legislative elements that should be a part of that agenda. ensuring that all systemically important financial institutions are subject to effective consolidated supervision is a critical first step. second, a more macroprudential outlook – that is, one that takes into account the safety and soundness of the financial system as a whole, as well as individual institutions – needs to be incorporated into the supervision and regulation of these firms and financial institutions more generally. third, better and more formal mechanisms should be established to help identify, monitor, and address potential or emerging systemic risks across the financial system as a whole, including gaps in regulatory or supervisory coverage that could present systemic risks. a council with broad representation across agencies and departments concerned with financial supervision and regulation is one approach to this goal. fourth, a new resolution process for systemically important nonbank financial firms should be created that would allow the government to wind down a troubled | 0 |
likely to experience a full - fledged increase in the number of full - time workers. a more troublesome problem is that wage - setting practices have changed during the prolonged period of deflation. because of low labor mobility due to relatively widespread lifetime employment, wages of regular employees in japan tend to reflect labor market conditions only insufficiently, at least in the short term. therefore, some kind of mechanism, a “ visible hand, ” is necessary for wages to rise. prior to the period of deflation, the so - called bis central bankers ’ speeches spring offensive of the practice of simultaneous wage negotiations between management and labor at major firms in spring served as such a mechanism for negotiating wage increases. however, as deflation continued, this mechanism stopped working effectively. that is, firms needed to cut wages in order to reduce costs against the background of falling prices, while it was rational for workers to accept a decline in wages in exchange for job guarantees. as a result, in the past decade or so, the practice of raising base wages through the spring offensive had more or less disappeared. this spring, however, has seen increases in base wages and / or bonuses not only among large firms but also among small and medium enterprises, partly reflecting calls by the government. for wages to increase at an appropriate pace in the future, it is necessary to have some kind of coordination mechanism to bring about wage increases. in such a mechanism, the bank of japan ’ s price stability target can serve as a benchmark for firms in their wage setting. that is, once the bank has succeeded in firmly anchoring inflation expectations at 2 percent, this could provide the basis on which wage negotiations between management and labor are conducted. firms and households can then base their economic decisions firmly on the expectation that prices will rise at a rate of around 2 percent. thus, creating an appropriate wage - setting mechanism plays an important part in anchoring inflation expectations at 2 percent. concluding remarks i have so far talked about the effects of balance sheet adjustments and deflation on the labor market, but there is one topic i have yet to touch on. this is an issue that concerns the supply of labor, namely, demographic changes. reflecting the aging of japan ’ s population, the labor force participation rate has been on a downtrend, and serious labor shortages are likely to emerge in the future. the downtrend in the labor force participation rate is due to japan ’ s demographic composition and therefore does not come as a surprise. however, | masaaki shirakawa : what is so special about financial innovation? keynote address by mr masaaki shirakawa, governor of the bank of japan, at the netherlands bank conference in honour of mr nout wellink on “ welfare effects of financial innovation ” ( via videoconference ), amsterdam, 11 november 2011. * i. * * introduction today i am honored to have the opportunity to appear as the keynote speaker of this conference marking the retirement of nout wellink. i wish i could participate physically, but thanks to innovation, which is the very topic of today ’ s conference, i am now able to join you through videoconference from tokyo, about 10, 000 kilometers away from amsterdam. there is, of course no need for me to remind you of nout ’ s distinguished career, at the netherlands bank, the basel committee and the bank for international settlements, to name just a few. i would just like to thank him for his contributions on all the occasions i had the pleasure of working with him, and for his friendship outside the meeting rooms. central bankers, or policymakers more generally, are quite fond of innovation. it is the catalyst for growth. innovation is the key to increasing productivity, and without it, our economies can only grow linearly with the increase in input factors. innovation is now all the more important, especially in the developed economies, because – as our population ages and the labor force stops growing rapidly – productivity growth underpinned by innovation is the only way for us to realize growth in the years ahead. in this sense, innovation is something we regard as inherently positive. nevertheless, we are gathered here to examine the welfare effects of financial innovation. the fact that we can usefully discuss such things implies that not all developments described as financial innovation might be welfare enhancing. why is it that we have to persuade other people – and perhaps even ourselves – of the merits of innovation, when we add the word “ financial ” in front of “ innovation ”? today, i would like to explore why we are sometimes uncomfortable with certain developments in the finance industry that are labeled “ innovation ” by their promoters, and consider policy implications for central banks, with a view to encouraging innovation that would benefit the whole society. fifteen minutes will not be enough to arrive at definitive conclusions, but let me give it a try. ii. drivers of innovations in the financial industry innovation means changing the way business is conducted in order to better serve the clients of the | 0.5 |
institutional setups. there isn ’ t a one - size - fits - all sort of recipe for implementing a more responsible economic policy. in the paper, the role played by monetary, fiscal and wage policies seems to be rather underestimated. in my view, the contribution of better and sounder policies to explain the trend of domestic inflation in both industrial countries ( ics ) and emerging markets economies ( emes ) over the last 20 years has been crucial. the empirical literature has provided vast evidence, particularly for the united sates, that changes in policy objectives and management have been important to explain the decline of inflation since mid 80 ’ s. in developing countries, where fiscal imbalances were a main source of monetary instability and inflation, improvements in tax and expenditure policies contributed significantly to explain the decline of inflation since the early 90 ’ s. - bill also mentions that it is strange for inflation to remain so low given that monetary conditions seem to have been particularly lax for a rather long period of time. this is a true puzzle. however, considering the recent trend in certain variables related to the opportunity cost of keeping money, as well as the high global growth in the past years. we cannot rule out that, in real terms, the demand for money has genuinely increased. conclusive evidence to make this point is hard to find yet. further research on the subject should add some light on this issue. - white remarks the low cost of buying protection against corporate bankruptcies until the outbreak of the august crisis. he compares the cost as of mid july 2007 with the cost in the recessions of 1981 and 1991. however, the comparison is not totally valid because the depth and liquidity of the cds market in 2007 was enormously higher than in 1981 and 1991. - let me emphasize though, that financial integration should be given a larger role in the discussion between globalization and inflation. in particular, when assessing the effectiveness, credibility and commitment of monetary policy in emerging market to deal with inflation and inflation expectations. in my opinion, the depth of the financial system and its integration with capital markets has a powerful disciplinary effect on monetary policy as it reduces incentives to pursue expansionary policies as foreign capital would flow out to other markets with more predictable returns. also, financial development allows agents to substitute assets in local currency to protect themselves against inflation, restraining again the discretionary use of monetary policy. moreover, financial integration allows financing current accounts deficits, weakening the link between domestic output and demand. then, an | policy makers, should not pay any attention whatsoever to neutral values for real variables ( such as the output gap ). in my view we should look at output gap but do not consider them as the “ bible ”. - while pointing to evidence of a decline in the devaluation pass - through in emerging market economies, white writes that it is remarkable that inflation stayed so muted after the brazilian and argentine devaluations. regarding the latter episode, it must be emphasized that this was mainly due to massive unemployment before and during the crisis, after three and a half years of a continuous decline in output. the significant excess supply of labor was by far the main factor explaining the low pass through. yet, during the following 12 months, inflation exceeded 40 percent, mainly as a result of realignment in the relative prices of tradable goods. when unemployment began to be reabsorbed, inflation pressures resumed their upward trend. - a widespread hypothesis holds that lower headline inflation is due to lower imported prices or larger imports of cheaper goods, as a result of lower production costs arising from higher competition in the face of production factor globalization. however, this essentially microeconomic explanation of such an essentially macroeconomic phenomenon is suspicious. let me borrow a term coined by cecchetti, who calls this the “ accounting ” theory of inflation. the problem arise because prices affected by trade are “ relative ” prices. the import of a foreign product that is cheaper than the domestic one produces a change between this price and the other prices in the economy, while inflation is actually the aggregate change in general nominal prices. what is fallacious is to take these two notions the same way. this is better appreciated when taking into account that, by definition, when the relative price of a certain good falls, there should be a rise in the price of the other goods against which it is compared. - the authors points out as a “ puzzle ” that inflation should have dropped so dramatically in many countries with very different institutional arrangements, different monetary policy and, above all, different exchange rate regimes. in particular, he stresses that, during much of the period under review, many of these countries had fixed exchange rate regimes. 2 however, calling it a puzzle seems exaggerated. lower inflation in my opinion is the consequence of a more “ responsible ” management of fiscal, monetary and wages policies, which might be a result of a growing awareness of the costs of inflation. these policies can be put into effect by diverse means and through different | 1 |
began to lend money to the banks at longer maturities to secure their funding. during three months in autumn 2008 the riksbank increased its lending to the banks by more than around sek 450 billion. to begin with the riksbank granted loans in kronor at three - month and six - month maturities, but gradually the maturities were increased to twelve months. lending at a variable interest rate has declined over the past six months, but has been supplemented by the previously - mentioned lending at a fixed interest rate of almost sek 300 billion ( figure 7 ). figure 7 the riksbank ’ s lending in sek and usd sek billion sek, commercial paper usd sek, variable rate sek, fixed rate jul - 08 oct - 08 jan - 09 apr - 09 jul - 09 oct - 09 source : the riksbank. the riksbank has also granted loans in us dollars. during the crisis there was a shortage of dollars around the world and the banks experienced difficulty in obtaining funding in dollars. at most, lending in dollars corresponded to around sek 250 billion in spring 2009. since then the banks ’ interest in borrowing dollars from the riksbank has declined. quite simply, it has become cheaper for the banks to borrow dollars in the market than from the riksbank, which is a sign that the financial markets are gradually functioning better. these loans have now ceased. for simplicity ’ s sake i am talking about lending to the banks. but the correct designation for the group of institutions which can borrow from the riksbank is monetary policy counterparties. over the past year we have extended the number of counterparties who can act as counterparts in our fine - tuning transactions and introduced a new category of counterparties, known as restricted monetary policy counterparties, who can purchase riksbank certificates and take part in the riksbank ’ s auctions of loans at longer maturities, without being participants in the rix system. 1 we have also given special liquidity assistance in autumn 2008 to kaupthing and carnegie, which they have since repaid. all lending by the riksbank is against collateral. over the past year we have extended the eligible assets that can be used as collateral, but this still encompasses securities that are safe assets. the securities accepted are debt securities issued primarily by the swedish government and by swedish mortgage institutions. all increased lending by the riksbank ends up in some form of increased deposit on the riksbank | to facilitate their funding. as a result of this, the banks have had large liquidity surpluses and have to a great extent invested the surplus in the riksbank. there are several possibilities for doing so. firstly, the riksbank issues riksbank certificates every week with a one week maturity and at an interest rate that is the same as the repo rate decided on, that is, at present 0. 25 per cent. this assumes that the bank system – as is now the case – has a surplus and needs to invest money. if the bank system instead has a deficit, as was the case just over a year ago, then the riksbank will implement what are known as repos every week with a week ’ s maturity. this means that the riksbank buys securities from the banks with a simultaneous agreement that a repurchase will be made one week later and where the interest rate is the repo rate that has been decided. secondly, the riksbank carries out what are known as fine - tuning transactions every day to smooth the daily fluctuations in the bank system ’ s regular payments. the banks can invest money in the riksbank overnight at an interest rate of 10 basis points below the repo rate, that is, at present 0. 15 per cent. this also assumes that the bank system as a whole has a surplus towards the riksbank at the end of the day. if they instead have a deficit, the banks can borrow money from the riksbank overnight at a rate that is 10 basis points above the repo rate. the fine - tuning is normally very small, but during the crisis it has grown to entail very large amounts. thirdly, there are so - called standing facilities. the banks have the right to borrow from the riksbank overnight at a lending rate that is 50 basis points higher than the repo rate, and the right to invest surplus in the riksbank at a deposit rate that is 50 basis points lower than the repo rate. but these possibilities are very little used, as there are other alternatives that are more advantageous for the banks. something that has attracted relatively great attention internationally is the fact that the low repo rate and the application of an interest rate corridor of plus / minus 50 basis points for the riksbank's standing facility means that the riksbank in principle applies a negative interest rate for deposits in the riksbank. in practice, this is of little | 1 |
human capital development human capital, representing the skills, health, and knowledge of our population, emerges as a cornerstone. a healthy, educated, and skilled populace drives innovation, boosts productivity, and ensures adaptability in the face of change. from the classrooms in kingston to the clinics in bridgetown, our investment in our people is our investment in our future. indeed, the research has shown that nations that have invested in education, healthcare, and skill development have not just grown ; they have ascended. singapore, south korea, and finland come to mind as exemplary nations 2 / 10 bis - central bankers'speeches that have ascended due to significant investments in human capital development. singapore transformed from a small port city into a global powerhouse, attributed to its world - class education and healthcare systems and emphasis on skill adaptation for future economies. south korea, marked by its focus on technology and skills training and advanced healthcare, metamorphosed from war devastation to hosting a robust economy with global brands like samsung. finland, boasting one of the world's best education systems and accessible healthcare, enjoys a high standard of living and is often cited among the happiest countries globally. these nations epitomise the profound impact of comprehensive investments in human capital on national ascension and global prominence. therefore, policies that focus on improving access to quality education, vocational training, and lifelong learning opportunities are crucial for sustainable economic growth. 4. productivity : the silent workhorse of growth a core determinant that often operates behind the scenes is productivity. efficient production processes, technological adoption, and continuous skill upgrades are key. for the caribbean, enhancing productivity means leveraging technology, embracing innovative agricultural and manufacturing practices, and fostering a culture of continuous learning and adaptation. 5. embracing technological innovation in this digital age, technology and innovation are the winds beneath our wings. technology is not just about gadgets and apps ; it's about transformative change. technological innovation and the adoption of sustainable practices are key determinants of long - term sustainable and inclusive economic growth. the ability to upgrade and diversify economies through the adoption of new technologies not only boosts productivity but also fosters resilience to changing global market dynamics. embracing green technologies and sustainable practices, such as clean energy, waste management, and sustainable agriculture, is essential for sustainable economic growth. 6. inclusive growth : leaving no one behind an economy that benefits only the elite is an economy built on shaky ground. empirical evidence suggests that addressing income di | to establish tech institutes or coding bootcamps. this can provide young people with skills in areas like ai, data analytics, or app development. i am talking about digital health initiatives like telemedicine which in my opinion is especially relevant for the scattered geography of the caribbean, as telemedicine can ensure everyone has access to quality healthcare advice, irrespective of their location or station. we should also be seeking to digitise health records thereby streamlining medical services and ensure timely care. i am talking about promoting e - commerce and digital marketplaces. specifically, we should encourage the development of local e - commerce platforms to reduce reliance on international giants. this can keep capital within the region and cater more closely to local needs. we should also seek to strengthen and expand digital payment solutions, from mobile wallets to online banking. this can boost e - commerce and reduce transaction costs. i am talking smart tourism where we offer virtual tours of tourist spots, catering to the growing market that prefers exploring destinations digitally before visiting. how about digitising our tourist services, from digital check - ins at hotels to augmented realityguided city tours ; let us use the technology to enhance the tourist experience. 5 / 10 bis - central bankers'speeches i am talking about building a remote work infrastructure. with the global shift towards remote work, the caribbean can position itself as a paradise for digital nomads. reliable internet, co - working spaces, and digital services can attract a global workforce. like i said, the possibilities are endless when it comes to the digital space, but i will mention one last low - hanging fruit and that is digitalising the arts and culture sector. two ideas immediately come to mind 1 ) online galleries where we promote caribbean culture by digitising and showcasing art, music, and literature on global platforms. 2 ) digitalise our festivals : our various carnivals can have digital counterparts, thereby broadening their reach. digital transformation isn't a mere trend ; it's the future. the caribbean stands at an inflection point, with the potential to harness the digital revolution's winds to sail towards prosperity, inclusivity, and resilience. by investing in infrastructure, skills, and innovation, we can ensure that our digital voyage is not just successful but also distinctly caribbean in its flavour and spirit. pillar 3 : green energy transition. the urgent need for a green energy transition is a global imperative, and for regions like the caribbean, it is not just | 1 |
svein gjedrem : the outlook for the norwegian economy address by mr svein gjedrem, governor of norges bank ( central bank of norway ), for norges bank ’ s regional network, region east, oslo, 25 september 2009. * * * please note that the text below may differ slightly from the actual presentation. the speech is based on the assessments presented at norges bank ’ s press conference following the executive board ’ s monetary policy meeting on 23 september and monetary policy report 2 / 09. it has been a year since financial turbulence developed into a full - blown crisis. the result was the most severe downturn in the global economy since the second world war. key rates were set at historically low levels both in norway and abroad. government spending has increased considerably to support demand for goods and services. global economic activity is now picking up, albeit from a very low level, and unemployment is high. financial market conditions have improved, although liquidity remains tight in many markets. the financial crisis eroded confidence in banks, counterparties and contractual partners. access to export credit came to a halt, international trade slowed sharply and manufacturing sales stalled. with financial markets improving over the past six months and an increase in the credit supply, global trade is now picking up slightly. manufacturing output has recently increased in the us, the uk, japan and many emerging economies, while it continues to fall – albeit at a slower pace – in sweden and the euro area. growth in public demand, stronger confidence in financial markets and low key rates are fuelling investment abroad. even though the global economic situation now seems to have stabilised, there is still a risk of continued low growth for a fairly long period ahead. the severe downturn and fall in commodity prices has led to very low or negative consumer price inflation in many countries. inflation is still moving down and is now negative in for instance the us, the euro area, sweden, japan and china. core inflation is more stable, but has also shown a slight decline recently. the current low level of activity and high unemployment will also act as a brake on inflation in the period ahead. one characteristic of the crisis was the substantial increase in money market rates. confidence between banks evaporated. banks reacted by raising interest rates on loans to businesses and households. they started to turn off the lending tap. measures implemented by central banks and governments have had a stabilising effect. the most important markets have also gradually become less disorderly, | benjamin e diokno : the philippines beyond survival - becoming an economic outperformer post - pandemic speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the scb sovereign investor forum, 14 october 2020. * * * chief executive bill winters, other standard chartered bank officials and all attendees of this virtual roundtable, a pleasant day to all of you. my presentation is divided into three parts. first, i will discuss philippine macroeconomic updates. second, i will talk about how the country ’ s banking sector is faring. and third, i will share insights on where we see the domestic economy is headed post pandemic. first, macroeconomic updates … at this point, i can report that the worst is over. while we ’ re not out of the woods yet, there has been progress as the economy gradually opens up from the strict lockdown in march to june to less stringent quarantine measures. we ’ re learning to live with the virus. now, we ’ re at an inflection point. for instance : the purchasing managers ’ index ( pmi ) moved past the growth threshold of 50, settling at 50. 1 in september. net inflow of foreign direct investments already posted growth rates starting in may, with the latest at 35. 2 percent growth in july. this points to favorable job - generation prospects ahead. speaking of jobs, the unemployment rate improved from a record high of 17. 7 percent in april — which was the height of the lockdown — to 10 percent in july. contraction of imports slowed down from 65. 3 percent in april to 22. 6 percent in august. and, the decline in exports eased from 49. 9 percent in april to 18. 6 percent over the same period. major indicators suggest that financial markets are responding well to our policy responses. and, the peso is among the strongest currencies in this part of the world, recording a year - todate appreciation of 4. 36 percent against the us dollar as of october 13. with all these positive trends as backdrop, we expect an even firmer economic recovery by next year. based on official government projections, gdp will swing from a contraction of 4. 5 to 6. 6 percent this year to a growth of 6. 5 to 7. 5 percent next year. the international monetary fund ’ s latest gdp forecast for the philippines | 0 |
the old system of trading would have to be abandoned. this also meant that the old raison d'etre of the bilateral trade department was fading. at that stage, the board of the bank of finland started discussions internally and with other stakeholders concerning preserving the analytical capabilities of the department. the late matti vanhala, in particular, stressed the need to understand economic developments in finland ’ s large eastern neighbour also in the new circumstances. in fact, we can say that finland always has a vital interest in analytically understanding its eastern neighbour – from geopolitics to its economy. moreover, matti vanhala – who was responsible for the bilateral trade department – already had 1 / 3 bis central bankers'speeches the idea that such analytical capabilities would be of benefit to russian policy - makers and also other european countries. in fact, cooperation at the european level has been one of the strengths of bofit ’ s work over the years. in may 1991, it was decided to disband the old department and establish a new unit specializing in analysis of the soviet economy. just after the unit for eastern european economies had begun its work on september 1, 1991, the main object of its study, the soviet union, ceased to exist. but the arguments for understanding the economic developments in a large neighbour were and obviously remain true, even if the neighbour is now called the russian federation. however, it is noteworthy that dissolution of the soviet union also meant that the three baltic states were able to regain their independence – a process that had begun in the 1980s. the new unit would analyse the baltic economies up to their membership in the european union in 2004. we can note that the late member of the bank of finland board, esko ollila, a long - time and well - known estophile, was instrumental in forging many of the institutional ties between the estonian central bank and the bank of finland. currently, the majority of bofit activities concern two large emerging economies, namely china and russia. the emergence of china as the world ’ s largest exporter and the second largest economy has been first a gradual and then intensifying epoch - making tectonic shift of the global economy during the past four decades. the bank of finland hired its first china economist already in 1999, well before china joined the w to and before china started to really affect the global trading system and also production in other countries. many of the recent analyses by bofit and the | bank of finland more widely have looked into the functioning of global production networks and world trade. china is obviously a very important player in global and regional production networks, but also production chains in europe and northern america remain vibrant. and despite the current problems with shipping and so on, our analysis clearly shows that globalization has not been cancelled. in fact, this year the volume of international trade will reach an all - time high. as the centre of gravity of the global economy continues to shift away from the northern atlantic, analytical skills and traditions in researching faster - growing emerging economies are even more important for understanding our world. nevertheless, it would be wrong to claim that all is well in the global economy. once the current hiccups related to the uneven covid recovery are past, we will not return to a situation with only minor trade frictions. it is obvious that now, and also in the future, our global economy continues to be marked by very intense and tense great power competition – in innovation, in technology in business, in many, many sectors. this competition can sometimes take the guise of a trade war, as when the us imposed tariffs on chinese imports. but, perhaps even more significantly and profoundly, competition is felt in the fields of technology and science. nevertheless, let ’ s hope that there is enough sense of international cooperation in the ongoing cop26 climate conference in glasgow, to help the world avoid an environmental crisis. in the current vacuum of global cooperation, the central banks are an exception. in spite of all the ongoing global tensions and the return of power politics, international cooperation among the central banks is very much alive and functioning. it was crucial in sparing the world from a new recession or depression, when the covid - 19 pandemic hit 20 months ago. the rapid and forceful action especially by the federal reserve and the european central bank has supported the economy over the troubled waters. and all through the crisis, cooperation with the people ’ s bank of china and bank of russia has also remained at a very good level. our intention is to keep it that way in future as well. 2 / 3 bis central bankers'speeches navigating these new, partially uncharted waters of geoeconomic competition requires solid analysis regarding economic and societal developments. that indeed is core business of bofit. ladies and gentlemen, with these words i would like to welcome you to bofit ’ s 30th anniversary conference. i hope the discussions and presentations, both in physical form here | 1 |
remote solutions during the pandemic probably accelerated the digitization of tasks, which in turn has broader implications for income distribution and productivity growth, as well as the property market. in contrast, other structural trends may have been somewhat arrested by recent events ; for example, pandemic and geopolitical disruptions injected fresh fragmentation impulses to the world economy and possible unmoored economies from their previous low inflation equilibria. 11 these four issues — the complex nature of shocks, along with the appropriate policy response, labour market effects and interactions with pre - pandemic structural trends — are key pivots that confront the global economy. and they will each have some hearing at this year ’ s forum. prof viral archarya started us off last evening with an astute and realistic assessment of the global landscape before us and the vulnerabilities that lurk in financial market adjustments, drawing in insights from his research. 12 for the policy note session on “ labour market policies after covid - 19 ”, our speakers are professor eric french and professor john haltiwanger, two eminent labour economists whose work central bankers have always paid close attention to. they will discuss how countries can best formulate labour market policies in the pandemic ’ s wake to restore and rebuild workers ’ ability to engage in the labour market of the future. 13 at lunchtime, we are privileged to have professor emi nakamura join us virtually. she will speak on “ inflation, monetary policy and the phillips curve ”, a topic that that has become dominant to policy considerations this year. 14 anchoring today ’ s discussions is professor ricardo reis, the author of this year ’ s commissioned paper, who will discuss whether monetary policy has placed an undue emphasis on the natural real rate of interest, which we term r * and measure by government bond yields, a parameter that is inherently tricky to define and problematic to measure. despite these difficulties, r * has seemingly come to occupy a central place in assessments of the appropriateness of the policy stance, a conundrum that professor reis will help clarify. we are delighted that professor andres velasco and professor vissing - jorgensen are with us to discuss the paper. 15 but first, we are honoured to have dr li bo, deputy managing director at the imf, to deliver the opening address for ampf2022. he brings with him a wealth of experience in economic policymaking, serving in a range of monetary - and macro | – did not keep up with changes in the financial sector and were insufficiently attuned to systemic risks. once concerns began to develop about escalating losses at large firms, insufficient liquidity and capital interacted in an adverse feedback loop. funding pressures contributed to “ fire sales ” of financial assets and losses, reducing capital levels and heightening liquidity pressures – culminating in the near collapse of the financial system in late 2008. capital and liquidity several factors encouraged excessive leverage, including market perceptions that some institutions were “ too big to fail. ” 8 financial institutions also had an incentive to engage in regulatory arbitrage, moving assets to undercapitalized off - balance - sheet vehicles. the complexity of the largest banking organizations also may have impeded market discipline. in addition, financial intermediation outside of the traditional banking sector grew rapidly in the changes in payment technologies have been rapid, and an area of particular interest is the fast growth of mobile payment and financial service technologies. the federal reserve has conducted several surveys to understand these developments, and the most recent results are discussed in board of governors ( 2015 ). a substantial body of research finds that financial development supports economic growth, including goldsmith ( 1969 ), king and levine ( 1993 ), rajan and zingales ( 1998 ), and levine ( 2005 ). it is noteworthy that this research emphasizes differences across countries, and that the united states is among the most financially developed countries in the world. beck, demirguc - kunt, and levine ( 2007 ) show that financial development reduces poverty and inequality in a study examining evidence across countries. zingales ( 2015 ) raises a number of questions regarding ways in which distortions in the financial sector may contribute to “ rent seeking ” activity that may promote inefficiency. philippon and reshef ( 2012 ) examine trends in compensation in the financial sector and the contribution of such trends to the increase in income inequality in the united states in recent decades. philippon and reshef ( 2013 ) and cecchetti and kharroubi ( 2012 ) revisit the links between financial development and economic growth, focusing particularly on these relationships around periods of rapid growth in the financial sector or among economies with a large financial sector. for a review of many factors that may have contributed to leverage in the financial sector and a discussion of how, in some cases, these factors reflect distortions that imply leverage was excessive, see admati and others ( 2013a | 0 |
environment for the pe and vc industry. hong kong now offers diversified fund structures through the introduction of the open - ended fund company ( ofc ) regime and a modernised limited partnership fund ( lpf ) regime, both providing also a redomiciliation mechanism. these two regimes have gained traction since their introduction. so far, more than 1000 ofcs and lpfs have been established in hong kong. on the taxation front, hong kong has an extensive network of comprehensive avoidance of double taxation agreements, or dtas, that cover major economies in asia including mainland china, japan, india, indonesia, as well as many major markets in europe, north america and the middle east. our dtas offer very favourable terms, in that they offer lower dividend and interest withholding rates. we are working hard to further expand the dta network. locally, we are exploring the scope for further enhancements to the carried interest tax concessions arrangement, based on the implementation experience so far. we are also reviewing the tax exemption regime for funds to identify possible areas of enhancement to better support the development of the fund industry. meanwhile, the hkma's exchange fund investment office is rendering tangible support for managers based in hong kong. it has already established alternative asset portfolios with dedicated allocation to smaller local hedge fund managers. the next step 3 / 5 bis - central bankers'speeches is to set up a dedicated allocation to smaller pe funds managed by local managers and those seeking to expand their hong kong operations. another exciting development is the establishment of the hong kong investment corporation ( hkic ). hkic consolidates the various public investment pockets introduced by the government in recent years, including investments in the greater bay area, strategic technology, portfolios with hong kong nexus, as well as the newly established co - investment fund. hkic has commenced operation recently and is identifying quality partners to make strategic investments. the hong kong government is also taking a proactive approach to provide further impetus to the long - term, balanced growth of the local economy and to make the city more liveable and sustainable. top priority is talent. hong kong currently hosts five of the global top hundred universities. but we want to attract more talent to deepen the bench. in less than a year, the various talent entry schemes have already granted permission to over 110, 000 talents from all around the world, and we continue to see a strong pipeline. looking for new growth areas is also important. in the years ahead, hong kong will leverage | with its other functions in consumer protection and financial stability, especially as the new and innovative services grow in scale or become widely adopted. cross - border coordination is also required to address potential arbitrage across jurisdictions, given the much wider reach of fintech products and services. derivatives markets, on the other hand, have a much longer history. the regulatory framework should therefore be informed by history, and lessons from the global financial crisis must not be forgotten. regulators need to guard against the problems that plagued derivatives markets before the crisis : namely, the overuse of leverage, excessive interconnectedness, and opacity. i don ’ t need to “ preach to the choir ” on the tremendous efforts exerted by regulators and market participants internationally to solve these problems. but i do want to remind ourselves to stay vigilant and ensure that implementation is seen through, as this work has not yet been completed. for example, initial margin requirements on non - cleared derivatives, which guard against the overuse of embedded leverage in derivatives, are still being phased - in in a number of jurisdictions including hong kong. at the same time, while derivative transactions that are intended to be cleared has increased five - fold in the past four years in hong kong, according to data from our trade repository, there is more room for further standardisation. finally, solutions such as deference mechanisms, which helps eliminate cross - jurisdictional regulatory arbitrage, are still works - in - progress between the hkma and our overseas counterparts. as we embark on further deepening of the derivatives markets in the asian region, the high standards set up by regulators and by the industry over the past ten years should be well respected, and strengthened regulations on margins, clearing, and transparency should be taken seriously as safeguards against potential risks. let me close by saying a few words about our host today. isda has been instrumental in promoting standardisation of documentation and practices in derivatives markets. in the process, it has played a key role in navigating the industry through post - crisis reforms. isda is and will continue to be an important platform for consensus building and knowledge sharing. i ’ m certain that isda will remain a valuable partner for everyone in asia as we continue to overcome the challenges i discussed today. i look forward to more fruitful collaboration going forward. 4 / 4 bis central bankers'speeches | 0.5 |
jean - pierre danthine : financial stability developments and the delayed new swiss banknotes introductory remarks by mr jean - pierre danthine, vice chairman of the governing board of the swiss national bank, at the media news conference of the swiss national bank, berne, 13 december 2012. * * * in my introductory remarks today, i would like to look at the main developments in the area of financial stability since the publication of our financial stability report in june of this year. afterwards, i will talk about the postponement of the new banknote series. in the area of financial stability, the improvement in the big banks ’ capital situation is particularly noteworthy. the prevailing uncertainties and the risks for the banking sector as a whole remain considerable, however. prevailing risks remain considerable general economic and financial conditions for the swiss banking sector remain difficult. on the one hand, the situation in the financial markets has eased since june 2012. this is largely due to various decisions and measures taken by governments and central banks worldwide. on the other hand, the easing of tensions in the financial markets should be interpreted with caution. should the measures already taken not be effective or should the progress made in restructuring government budgets be slow, we cannot rule out renewed turbulence in the financial markets. the european banking industry is also in a fragile state. although cds premia for european banks have been going down in the last few months, their level is still considerably above previous years as well as that of swiss and us banks. finally, as my colleague thomas jordan has explained, the global economic outlook remains modest. for europe, in particular, we have revised our short - term forecast downwards again slightly. for switzerland, the national bank is expecting moderate growth. economic conditions remain comparatively good, which – in conjunction with the low level of interest rates – is boosting the continued strong momentum in the mortgage and real estate markets. i will speak about developments in this market in more detail later on. to sum up, the risks in the banking environment remain considerable. first, the risk of an escalation of the european debt crisis is not insignificant. second, imbalances are building up in the swiss real estate market. this goes hand in hand with an increased risk of significant price corrections in the medium term. greater resilience of the big banks the situation of the big banks has improved since the last news conference, as both institutions have further increased their resilience. this increase was particularly pronounced at credit suisse. according | standard today, as a result of this commitment to quality. this means that the snb is not under any pressure to roll out a new banknote series quickly. the new series must meet very high security, quality and technical production standards – and will have to do so for at least 15 years after its first release. so it is worth taking the time to ensure that the new security features, which are complex, technologically innovative and have never before been applied to banknote design, can also stand up to the rigours of industrial production processes. a number of tests are currently being carried out. the first denomination in the new series – the 50 - franc note – will not be issued until 2015 at the earliest. we will announce the exact issue date as soon as production of the first banknote denomination has been completed. bis central bankers ’ speeches | 0 |
, and to impose transparency. fourthly, we are still today in a very difficult and very unpredictable environment. we permanently need to remain alert, and there is no place for complacency. i would have two main messages in that regard. as concerns direct government support to the financial sector, today ’ s priority is “ rapidity of execution. ” decisions that have already been taken should be implemented swiftly. this holds true, in particular, for recapitalisation, as currently only 55 % of funds earmarked for recapitalisation have been used in the euro area. in crisis times, rapid implementation is crucial. as concerns global governance, i insist on the absolute necessity to reinforce macroeconomic policy surveillance of systematically important countries and economies. the imf has to play a fundamental role in such monitoring, coupled with responsible and active peer surveillance. finally, central banks have a fundamental role in ensuring monetary and financial stability from a long - term perspective. morocco knows that it can count on the crucial contribution of bank al - maghrib, whose fiftieth anniversary we are celebrating today. the world economy can count on central banks to continue to act as anchors of stability, which are more needed than ever. the european central bank, for its part, will continue to be an anchor of stability and confidence. and i am pleased to note the recent proposals by the european commission, in line with the recommendations of the de larosiere report, to establish a european systemic risk council under the auspices of the ecb. thank you for your attention. | based and statecontingent elements. the expectation is that policy rates will remain at their present levels at least through the summer of 2019 and, in any case, for as long as necessary to ensure that the evolution of inflation remains aligned with the governing council ’ s current expectations of a sustained adjustment path. beyond the end of net asset purchases, reinvestments will mean that the eurosystem maintains a sizeable presence in euro area securities markets. enhanced forward guidance on rates, in turn, supports financial conditions by anchoring policy rate expectations more firmly at their present low levels. moreover, the conditionality embedded in forward guidance on all policy instruments ensures that the monetary stance will continue to evolve gradually and in a datadependent manner. the impact of our most recent decisions on financial prices was largely frictionless. our enhanced forward guidance on the ecb ’ s policy rates underlines their pivotal role as the main tool for adjusting the monetary policy stance in the future. overall, the present configuration of policy instruments will preserve the monetary stimulus that underpins the economic growth momentum in the euro area and the evolution of inflation along a sustained adjustment path. 4 / 4 bis central bankers'speeches | 0.5 |
. the bsp will activate these tools as appropriate. in the context of pursuing our price stability mandate, the bsp will continue to fine - tune its implementation framework for monetary policy to make it even more market - oriented. we have already started with the deployment of the interest rate corridor ( irc ) system. over time, the irc is expected to aid in advancing the development of the domestic money and capital markets based on greater reliance on the use of market - friendly instruments. the irc will further align our open market operations with liquidity needs of the market, strengthening monetary policy transmission channels. in terms of banking supervision, we continue to review and align our financial regulations and policies with international standards to improve risk management as well as ensure the competitiveness of our banks in view of asean integration … we intend to further enhance our macro - financial surveillance capability by, among others, improving coordination and cooperation with other government agencies and regulators … we are also working closely with other government agencies and private sector stakeholders to accelerate the development of the domestic debt market, including the development of the necessary financial market infrastructures that provide orderly trading, clearing, and settlement of the full range of financial transactions. earlier last year, the monetary board approved the ninth wave of liberalization of foreign exchange rules. this is to encourage the public to transact their fx needs with banks, enhance market efficiency, and improve data capture. there are more ambitious fx reforms to come. we also continue to enhance and update our financial sector regulations and policies to bring our 4 / 5 bis central bankers'speeches financial system at par with international standards … through the financial stability coordination council committee ( fscc ) chaired by the bsp, macro - prudential surveillance of the financial system is conducted on an on - going basis to enable early detection of any incipient signs of instability. our surveillance toolkit consists of a suite of quantitative models that attempt to address one or more aspects of systemic risks. this includes, among others : early warning systems ( ews ) that employ aggregate information from various sectors to generate early warning signs of systemic stress and at the same time, allow us to identify potential build - up of stress in specific sectors of the economy. stress tests that measure the resilience of the domestic financial system to various stress factors, including shocks from macroeconomic and financial variables like gdp, liquidity, and interest rates. stability indicators that potentially contain more information on the changes in domestic macro - financial conditions such as philippine | banking system, and prudent fiscal position will continue to provide fundamental support to the peso. solid macroeconomic fundamentals the developments we have seen thus far in 2017 point to overall economic resilience. economic performance in terms of gdp growth has been sustained. real gdp rose by 6. 5 percent in the second quarter of 2017. we are one of the fastest growing economies in asia … stronger economic activity is expected in the second half of the year due to the robust growth in the services sector and improved external trade conditions …. private consumption demand is expected to remain firm, aided mainly by sustained remittance inflows and low inflation. as more government infrastructure programs get underway, the positive spillover effects on 1 / 5 bis central bankers'speeches private capital formation will contribute to economic growth over the medium term … the economy is on track toward achieving the government ’ s full - year target of 6. 5 to 7. 5 percent … this extends our streak of uninterrupted growth to 74 consecutive quarters! … over the past five years, the economy has expanded by an average of more than 6 percent annually, a feat not accomplished since the 1970s. latest data shows that domestic liquidity conditions are ample to finance the requirements of the growing economy. domestic liquidity ( m3 ) grew by 13. 3 percent year - on - year in june 2017, faster than the 11 percent expansion in the previous month. this expansion in economic activity was sustained without fuelling inflationary pressures … although headline inflation rose slightly to 2. 8 percent in july ( from 2. 7 percent in june ), the yearto - date average inflation rate of 3. 1 percent. this is fully in line with our 2017 forecast. this means we will once again be solidly on target. indeed, our latest baseline forecasts indicate that inflation is likely to settle near the midpoint of the government ’ s 2 - 4 percent target range over the 2017 to 2019 forecast horizon. equally important, our banking sector continues to be fundamentally sound. the many reforms put in place by the bsp, along with the banks ’ significantly improved risk governance have resulted in clear improvements in the quality of philippine banks ’ assets and loan portfolios as well as in strong capitalization. these indicate superior ability to absorb risks … strong balance sheets have allowed bank lending activity to remain upbeat as it continues to flow into the country ’ s productive sectors such as real estate ; power and utilities ; manufacturing ; wholesale and retail trade ; and | 1 |
the benefit of the institutions and the market. i call on all of you to support such training initiatives by the school. 5. ladies and gentlemen : the program lays the essential groundwork for competing effectively in the islamic banking environment and explores the business opportunities and challenges of the field. we are delighted to be offering this new program in regional certificate in participatory / islamic banking which is fast becoming an attractive field in the global finance industry. globally, the islamic finance market is growing. islamic finance investments are now worth $ 1. 6 trillion and are forecast to increase to $ 2. 5 trillion by 2015. 6. in kenya we are committed to islamic banking framework for conducting financial transactions. we feel there is no better time to offer a course that will cover not just the conceptual apparatus, but the various opportunities and challenges that face islamic finance, whose growth shows no signs of abating. bis central bankers ’ speeches 7. ladies and gentlemen : the primary objective of the regional certificate in participatory / islamic banking program is to build the knowledge and human resource skills base that enhances competency of personnel serving in this sector. the benefits of attending this course include among others : • giving participants an all - round understanding of the documentary and structural issues involved in islamic banking. • the course will be resourced by top quality trainers of reputable professional standing. • the participants will be availed with highly researched reference text and training materials. 8. with these few remarks, ladies and gentlemen, it is now my honour and pleasure to launch the regional certificate in participatory / islamic banking program. i wish all of you success as you commence the learning process. thank you and god bless you all bis central bankers ’ speeches | the swedish economy ’ s total resources in the form of labour and machinery are currently being used to a normal extent. apart from new information on the current economic situation, there are also discussions of other new information that may be important for the forecasts in the slightly longer term. the first monetary policy group meeting with the executive board summarises new information after this it is time for the first large monetary policy group meeting. the entire executive board and most of the members of the monetary policy department take part in this meeting. in addition, a number of advisers to the executive board and employees of the financial stability department usually take part. a summary of the new information and the current status of the economy in sweden and abroad is presented at the meeting. we also run through the alternative scenarios ordered at the risk meeting a few weeks earlier and discuss whether they really capture the risks that we executive board members envisage. we also have the opportunity at this meeting to request more information on various issues considered important to the coming decision. the meeting usually takes around three hours. monetary policy department establishes its forecasts at approximately the same time as the meeting with the executive board, the monetary policy department establishes its view of macroeconomic developments over the coming three years. in a preliminary stage it focuses on around ten key variables such as inflation, interest rates, gdp, number of hours worked, exchange rates and resource utilisation. the forecasts are produced on the basis of the exogenous conditions, the international forecasts, the model forecasts for the swedish economy conditional on the current situation and assessments. the forecast for the interest rate path produced by the monetary policy department is meant to reflect the executive board ’ s normal, historical behaviour. it is not any form of recommendation from the department. all of this is discussed at a macro forecasting meeting in the monetary policy department. when the overall macroeconomic picture has been established, the economists chisel out the different points of the forecast in more detail. for instance, they make a complete forecast of the components in the balance of resources and in the labour market. finally they check the overall picture to ensure that the different parts of the forecast hold together and have been added up correctly. in total, the economists forecast around fifty variables. all of these are then compiled into an internal document that summarises the department ’ s view of how inflation and economic activity will develop in the future. another document is also created, explaining how the forecasts are affected by model | 0 |
lael brainard : building a safer payment system speech by ms lael brainard, member of the board of governors of the federal reserve system, at the federal reserve bank of kansas city conference “ the puzzle of payments security : fitting the pieces together to protect the retail payments system ”, kansas city, missouri, 25 june 2015. * * * thank you for the opportunity to speak to you today. i especially want to thank federal reserve bank of kansas city president esther george for her leadership in the initiative that has brought us all together here today to discuss improvements to the u. s. payments system. we have a diverse group of professionals participating in this conference, from industry, academia, and government. it takes all of us, working together, to maintain and enhance a safe and secure payment system. the payment system touches our daily lives, whether it ’ s a consumer paying a bill, a company deciding to upgrade its point - of - sale terminals, a technology startup developing a new peer - to - peer payment app, or the government issuing tax refunds. americans make more than 120 billion noncash payments each year. 1 but it ’ s only when something goes wrong, like a data breach at a major retailer or bank, that the typical end user takes notice of the payments process. as the central bank of the united states, the federal reserve plays many roles in the payment system, including payment system operator, supervisor of financial institutions and systemically important financial market utilities, regulator, researcher, and catalyst for improvement. most of you are aware of our current efforts to improve the speed, efficiency, and security of our payment system. i ’ d like to discuss that project for a few minutes, and then talk about four things that we should all be doing to enhance payment security. for some years, members of the public have told us with increasing frequency and intensity that they see the united states falling behind other nations in the speed and security of our payment system. we hear all the time that the federal reserve should do something about this. but, despite our multiple roles, the federal reserve does not have broad authority to simply restructure or redesign the payment system. so, two years ago, the fed published a consultation paper that sought public input on ways to make the u. s. payment system safer, more accessible, faster, and more efficient from end - to - end. 2 as we evaluated the substantial volume of public comment in response to the paper, the fed also | susan schmidt bies : sound capital and risk management remarks by ms susan schmidt bies, member of the board of governors of the us federal reserve system, at the oprisk usa 2006 conference, new york, 29 march 2006. * * * i would like to thank the sponsors of oprisk usa for providing an opportunity for bankers, regulators, consultants, and other interested parties to share their perspectives on operational - risk management. today, i will speak about the importance of risk management and its relationship to capital. i will also touch on the broad objectives of effective operational - risk management and offer specific observations on some of the challenges of operational - risk quantification. in addition, i will describe the current status of the basel ii process. importance of risk management over the past several decades, we have witnessed substantial changes in the u. s. banking industry, particularly at our largest institutions. these very large entities have broad geographic reach, operate in many lines of business, and offer a wide array of complex products and services. the largest institutions have moved away from the traditional banking strategy of holding assets on the balance sheet and have adopted strategies that emphasize redistribution of assets and active management of risks. the risk - management techniques employed by banking organizations continue to improve and adapt to the ever - changing financial landscape. the federal reserve, in its role as both a bank supervisor and the nation's central bank, has an obvious interest in maintaining the stability of the banking industry and the financial system as a whole. we, along with our counterparts at the other u. s. bank and thrift regulatory agencies, are responsible for ensuring that banking institutions operate in a safe and sound manner and have strong capital levels. but with the advent of very large banking organizations that engage in a wide variety of business activities - - some of them quite complex - - the federal reserve has become even more interested in ensuring that banking organizations understand the risks of these activities. for their part, bankers continue to improve the risk - management and risk - measurement processes at their institutions, and regulators have supported these efforts. banks themselves have created many of the new techniques to improve their risk management and internal economic capital measures in order to be more effective competitors and to control and manage their losses. by more clearly defining risk exposures and identifying the causes of and controls for their losses, bank management can more effectively integrate decisions about risk - taking into their strategic and tactical decisionmaking. banks that integrate risk measurement into their business - line goals often | 0.5 |
to me the indian markets are looking volatile and this could have serious ramifications on the rupee as well as domestic asset prices should the fund flow reverse ( which is easy in fii )? are there any steps planned to balance this? ds : it is true that fii flows are volatile and could pose policy challenges during both surges and sudden stops. but it is also difficult to identify, especially in real time, the permanent and temporary components in the capital flows. our approach to managing capital flows, therefore, is calibrated to respond to both domestic and global developments. we are quite agnostic towards the several available options. we deploy both quantity and price instruments as well as end use restrictions. our fdi policy is fairly liberal. foreign investment in a vast majority of sectors is approved under an automatic route. in fact, government approval is required for foreign investment only in a few select sectors. fii investments, on the other hand, are allowed both in the debt and equity markets. we have typically used control levers on the debt side. an important factor in managing capital flows is the absorptive capacity of the economy. despite large fii inflows in recent months, the rupee has not appreciated much because of our widened current account deficit. nevertheless, we are carefully monitoring the size and nature of flows and will take measures as and when needed. rural growth and capital reform development and entrepreneurship beyondbrics reader : what can the rbi do on its part to engender development in rural india? how can the rbi encourage entrepreneurship there so that we can reduce urbanization and decentralize india ’ s growth story? ds : from the very beginning, the reserve bank has been in the forefront of pioneering development initiatives. in the 1970s, we introduced the priority sector lending scheme mandating banks to direct a minimum proportion of their overall lending to sectors with a large welfare impact such as agriculture, medium and small sized business and exports. we introduced the lead bank scheme ( lbs ) after the banks were nationalized in 1969 – 70 thereby assigning banks a monitorable obligation for local development particularly in rural areas. our aim all along has been to encourage banks to have a positive bias towards agriculture, employment generation consistent with their business models and comparative advantage. large sections of the population and certain regions, however, still remain outside the formal banking structure. our main focus today is on financial inclusion as it is a necessary condition for sustaining equitable growth. there are few, | if any, instances of an economy transiting from an agrarian system to a post - industrial modern society without broad - based financial inclusion. we all know from personal experience that economic opportunity is strongly intertwined with financial access. such access is especially powerful for the poor as it provides them opportunities to build savings, make investments and avail credit. importantly, access to financial services also helps the poor insure themselves against income shocks and equips them to meet emergencies such as illness, death in the family or loss of employment. in order to further financial inclusion, the government and the reserve bank are pursuing several initiatives. the finance minister, in his last budget, announced that every village in the country with over 2, 000 people must have access to banking services by march 2012. we have asked every domestic commercial bank – public and private sector – to prepare its own financial inclusion plan ( fip ) and have it approved by its board. our aim in this respect is two - fold. one, each bank should have ownership of its fip. two, we want each bank to build on its comparative advantage. we want banks to be innovative and entrepreneurial and try out their own models and experiments consistent with their business models. even as the brick and mortar branch presence will expand, there will be a big emphasis on branchless banking based on the business correspondent ( bc ) model and leveraging on technology. in order to facilitate this, the reserve bank has also enlarged the types of entities that can be engaged as bcs. third, the government of india has set - up two funds – the financial inclusion fund for meeting the costs of developmental and promotional interventions towards financial inclusion, and the financial inclusion technology fund for meeting the costs of technology adoption. each of these funds is worth rupees 50bn. i must stress is that financial inclusion is not just a public good ; it is also a merit good. it empowers poor people in diverse ways. if there is to be “ inclusive growth ”, financial inclusion is the next big idea, as it promotes growth and equity. capital account convertibility beyondbrics reader : what is your view in respect of the timetable and progress towards fuller capital account convertibility, which determines the ease with which investments can be moved into and out of india? ds : our goal has been, and remains, to traverse towards capital convertibility along a gradual path – the path itself being recalibrated on a dynamic basis in response to domestic and global developments. | 1 |
made significant contributions to the formulation and implementation of the country ’ s first and second five year plans. he was instrumental in the enactment of new companies act and nationalisation of the imperial bank of india and life insurance companies. after resignation from union cabinet he worked as chairman of ugc during 1956 to 1961 and vice - chancellor of university of delhi from 1962 to 1967. in 1975, he was bestowed with the padma vibhushan award. he was also a co - recipient of the prestigious ramon magsaysay award in 1959 for distinguished government service. 5. for this year ’ s memorial lecture in honour of shri c. d. deshmukh, it is our pleasure to have mr. agustin carstens with us. he was the governor of the central bank of mexico from 2010 to 2017 and a member of the bis board from 2011 to 2017. as a bis board member, he chaired the global economy meetings and the meetings of economic consultative council. he also headed the international monetary and financial committee, the imf ’ s policy advisory committee for two years. 6. mr. carstens began his career at the bank of mexico in 1980, where he has worked in various capacities. he later served as mexico ’ s deputy finance minister and as deputy managing director at the imf. he was mexico ’ s finance minister from 2006 to 2009. he has also been a member of the financial stability board since 2010 and is a member of the group of thirty. 7. mr. carstens holds a doctoral degree in economics from university of chicago and has extensive research experience in the field of macroeconomic issues and finance. his work on ‘ latin american central bank reform : progress and challenges ’, which takes stock of the 1 / 2 bis central bankers'speeches institutional reforms of monetary policy in latin america since the early 1990s, was widely acknowledged. 8. today, mr. carstens will speak on “ central banking and innovation : partners in the quest for financial inclusion ”, – a topic which could easily be the most relevant at the current juncture. the recent emergence of fintech or digital innovations in finance is potentially a strong transformative force to shape the financial sector globally. a great benefit of these technological developments is the scope to expand financial outreach in a cost effective manner. at the same time, however, there are regulatory and supervisory challenges which the central banks across the globe need to address. 9. the reserve bank is committed to promote and deepen the cause of financial inclusion in india | on those markets may also exist. but their number will depend on the basket of deliverables of the futures contracts and how those baskets are defined. the alternative would be for a group of different countries ’ bonds to be traded interchangeably, but that seems an unlikely outcome. on the otc markets, the last 18 months has seen the proliferation of trades based on changing perceptions of the likelihood of convergence for the traditionally high - yielding countries and trades based on the differential yields of french and german government bonds. if i might embark on a regulatory diversion here, just for one moment, we at the bank expect those banks involved in convergence trading to undertake rigorous stress testing of their portfolios to assess the market risk they are running on open positions. that testing should also shed light on the potential for changes in their credit risk - for example if an otc contract is moving further in the money due to a market movement, the bank would become more exposed to its counter - party. we believe that the credit exposure implications of stress testing should be taken seriously too and are encouraging banks as best practice to do that. in our view not enough institutions do so yet. after emu, one would expect to see the elimination of exchange rate risk narrowing yield differentials in the bond markets. with exchange rate risk removed and a single monetary policy in operation, national bond yields will differ principally because of differential default risks and differences in market liquidity. that should leave default risk more readily monitorable and more efficiently priced. we should therefore see an enhancement of banks ’ and investment houses ’ credit analysis functions and more trading of credit differentials. my second question was how much will be traded in a post - emu world? this is not an easy question to answer. volumes are difficult to predict. on the one hand, emu may bring about a more stable interest rate environment, as well as eliminating national interest rates and exchange rates, reducing the need for hedging mediums and hence for derivative products. on the other hand, increased liquidity in the euro bond markets could encourage business and we could well see new participants entering the capital and derivative markets. my hunch is that the latter possibility is more likely. and that the market for carefully constructed derivatives contracts, properly sold to customers with a genuine need for them, will continue to expand. that brings me to my third question, where will the trading be done? i do not think that there is a determinist answer to this question. nor, | 0 |
eurosystem in a flexible and timely manner in the month they fall due, on a best effort basis, or in the subsequent two months. as in the case of july, the monthly net purchase volume per jurisdiction may therefore fluctuate owing to the timing of these reinvestments. again, the allocation of purchases across countries is clearly rules - based. temporary deviations are due to various – in part, even overlapping – technical reasons. these deviations reflect the fact that we want to be as market - neutral as possible in our monthly purchases. on a side note : another instrument to support market liquidity is the eurosystem ’ s securities lending. bonds purchased under the pspp have been made available since 2 april 2015, while bonds purchased under the other programmes were added to the framework later. 2. 3 no rewriting of the rules whenever compliance would impose any kind of restrictions ladies and gentlemen, so far, i have explained to you what it means operationally to ensure a smooth implementation of the pspp. namely, to achieve the intended purchase volume and at the same time to minimise as far as possible negative side - effects on market functioning. but it is equally important to consider what a smooth implementation of the pspp does not mean. namely, to rewrite the rules whenever compliance would impose any kind of restrictions. apart from the detrimental impact this would have on our credibility and reputation, adherence to our monetary policy mandate is at stake. for instance, there has been talk of the flexibility of the issue share and issuer limit, and of abandoning the capital key as a reference value for the allocation of the overall purchase volume to bonds issued by euro area member states. the limits relating to issue shares and issuers are important to prevent an awkward situation from arising given that the eurosystem has a crucial role in any sovereign debt restructuring that may be deemed necessary. the eurosystem would have to make use of its blocking minority in order not to violate the prohibition of monetary financing. as i mentioned earlier, by using the ecb capital key as a reference value, the eurosystem intends to avoid the moral hazard that could arise as a result of purchasing a disproportionately large amount of bonds issued by highly indebted governments. it is quite obvious that changes to these parameters – which the ecb governing council has set itself for good reason – would take monetary policymakers deep into the realm of fiscal policy. government bond purchases blur the line between | jens weidmann : opening – “ building a dialogue. two corporate collections of contemporary art ” opening by dr jens weidmann, president of the deutsche bundesbank and chairman of the board of directors of the bank for international settlements, of the joint art exhibition of the deutsche bundesbank and the national bank of belgium " building a dialogue. two corporate collections of contemporary art ", brussels, 16 may 2019. * * * ladies and gentlemen, art lovers and friends of the central banks, dear pierre, it gives me great pleasure to join you here today in opening this exhibition of artworks from the collections of the national bank of belgium and the deutsche bundesbank. i must say, this is an impressive and exceptionally pleasing space for an exhibition of this kind. we jumped at the chance of sending exhibits from our collection on a journey to brussels, to our friends at the national bank of belgium in the capital city of europe. it ’ s a premiere for us – never before have we shown our works outside germany. many are the areas in which the national bank of belgium and the bundesbank can look back on a rich history of cooperation : indeed, our collaboration stretches back to the days when we each still had our respective national currencies – the belgian franc and the deutsche mark – and our partnership is just as close today in the era of the single currency, the euro. not only do pierre and i see each other every two weeks on the ecb governing council and also in places like basel – there are a great many colleagues from our respective institutions who work hand in hand in eurosystem committees and working groups. and i am particularly delighted to now see that the curators of our art collections have also teamed up to organise this outstanding exhibition. they have brought together large - scale paintings, photography and all manner of sculptures. all the works on display here are taken from the collections of our respective institutions. both the national bank of belgium and the bundesbank have been avid collectors of art for many decades now. over the years, we have each gathered quite sizeable collections which shed some light on how art has evolved in belgium and germany. but why do central banks collect art in the first place? there are two reasons for that. first, because we ’ re looking to engage with society at large. as public institutions, we have a sense of commitment to the arts and culture in our respective countries. second, we also feel that it is crucial to incorporate art | 0.5 |
investor and other stakeholder initiatives. judging from this evidence, while the response of financial institutions is positive, it is still very much in an early stage. and in the case of asia, the progress is even more limited. the main supplier of carbon credits in cdm is china, while the rest of asia lags behind. in asia, the engagement of financial institutions on climate change is scattered and not yet a momentum. the progress is hampered partly by inadequate supporting framework that includes lack of clear policy and incentive as well as information. let me now discuss some of the current problems in asia and the prospects for the financial system in emerging markets, especially in asia, to become more engaged with the issue. given limited progress so far, the challenge is how to engage the financial system in emerging markets more extensively on climate change. in moving this issue forward, a critical role has to be played by policy, especially on the role of incentive and the development of tools that can facilitate the response to climate change. on incentive, a good starting point is to discuss the principles that would be important in guiding the design of policy, which in my view, four key principles stand out. first, the role of the states and policy are critical to ensure that the global rule of the market is clear and continuous beyond 2012. this is because any uncertainty about the global rule will only discourage future efforts and derail the momentum of the current efforts. second, policy at the country level should focus on providing market infrastructure that assists adaptation and mitigation i. e. legal, tax, regulatory framework, accounting, and information. but more importantly, correct incentive structure has to be put in place to internalize benefits from clean technology. third, under the incentive structure provided, given many uncertainties surrounding climate change, it is important that the strategy to promote increased engagement relies on market mechanism to build growth and innovation. this is because the market would be in a better position to assess and price risk - return tradeoffs more efficiently. and fourth, financial regulation should be neutral on the issue, focusing instead on risk management capability of financial institutions, especially the ability to handle new risk and new innovation, with a view of maintaining soundness and stability of the overall financial system. under these key principles, the actual design of incentive for specific economy would vary, taking account of country ’ s specific circumstances such as the state of economic development, the level of financial deepening, and the strength of its policy institution. turning now to | . in particular, basel iii calls for more and better capital of financial institutions and also introduces leverage ratios and stresses the role of liquidity risk. – second, they also include macro - prudential regulations, aiming to mitigate systemic risks across the banking system. better and more capital buffers are supposed to make the banking sector more resilient in the case of another crisis. the increased capital requirement may come at high cost, though. if banks hold too little capital, they are left crisis - prone and in the potential need of bail - outs. too much capital, however, could lead to huge swathes of the banking business becoming unprofitable. this might cause higher borrowing cost which could affect economic growth negatively. by consequence, riskier assets but more profitable activities might be driven into the shadow - banking sector. but the regulation of the shadow banking system is still an unsolved issue. these entities are no banks in the legal sense, although they take – and generate – similar risks. if there is a strict silo - regulation of the formal banking sector, the actual risky business does not disappear, but moves on in the non - regulated sector. an important issue is the problems of banks that have become too big or too interconnected to fail. the idea that a “ systemically important financial institution ”, sifi, will be saved in a crisis because of its systemic importance is not compatible with the core principles of a market economy. those who fail in the market have to bear the ultimate consequence of leaving the market. but if the maxim is “ too big to fail ”, then the state and the taxpayers are vulnerable to blackmail. compare kern, steffen : global financial centres after the crisis, db research, august 2010. bis central bankers ’ speeches the financial crisis has exacerbated the problem in so far as some of the surviving banks have become even bigger or more interconnected. moreover, the government guarantees which were appropriate in the crisis now encourage banks to grow, to connect and to take even bigger risks. to repair this clearly flawed incentive structure, the g20 endorsed the financial stability board ’ s ( fsb ) policy framework to address the moral hazard risks and externalities posed by sifis. the key policy objectives of the fsb sifi framework are to ( i ) increase their loss absorption capacity to reduce the likelihood of their failure, ( ii ) to facilitate the orderly restructuring or unwinding of a failing sifi to reduce the | 0 |
sustainable rates of production in some of the more secure and accessible oil fields, such as those in the north sea, have been declining. in view of these factors, estimates of long - term oil supplies have been marked down in recent months. long - dated oil futures prices have risen along with spot prices, suggesting that market participants also see oil supply conditions remaining tight for years to come. the decline in the foreign exchange value of the dollar has also contributed somewhat to the increase in oil prices. the precise size of this effect is difficult to ascertain, as the causal relationships between oil prices and the dollar are complex and run in both directions. however, the price of oil has risen significantly in terms of all major currencies, suggesting that factors other than the dollar, notably shifts in the underlying global demand for and supply of oil, have been the principal drivers of the increase in prices. another concern that has been raised is that financial speculation has added markedly to upward pressures on oil prices. certainly, investor interest in oil and other commodities has increased substantially of late. however, if financial speculation were pushing oil prices above the levels consistent with the fundamentals of supply and demand, we would expect inventories of crude oil and petroleum products to increase as supply rose and demand fell. but in fact, available data on oil inventories show notable declines over the past year. this is not to say that useful steps could not be taken to improve the transparency and functioning of the dominant role of commodity prices in driving the recent increase in inflation can be seen by contrasting the overall inflation rate with the so - called core measure of inflation, which excludes food and energy prices. core inflation has been fairly steady this year at an annual rate of about 2 percent. futures markets, only that such steps are unlikely to substantially affect the prices of oil or other commodities in the longer term. although the inflationary effect of rising oil and agricultural commodity prices is evident in the retail prices of energy and food, the extent to which the high prices of oil and other raw materials have been passed through to the prices of non - energy, non - food finished goods and services seems thus far to have been limited. but with businesses facing persistently higher input prices, they may attempt to pass through such costs into prices of final goods and services more aggressively than they have so far. moreover, as the foreign exchange value of the dollar has declined, rises in import prices have put greater upward pressure on business costs and consumer prices. in | so hard under the pressure of competition and recession to become less rigid and more flexible have in fact done so. but those are all guesses - - or wishful thinking. we don ’ t know for sure. the price puzzle is why prices have been so well behaved in the face of labor costs that have been rising, albeit not especially fast. has the economy, as so many business anecdotes allege, really become more fiercely competitive both nationally and internationally? is the ability of firms to absorb labor cost increases without raising prices and without apparent reduction in profit margins confirming the hypothesis that productivity is rising faster than we thought, or faster than the admittedly inadequate data have been telling us? indeed, it is the productivity puzzle that may hold the key to the gratifyingly mysterious behavior of the economy. economists have thought for some time that the increasing importance of services in the economy is confounding the ability to understand what is happening to both product and productivity. we observed an increase in manufacturing productivity, but not in service productivity. indeed, measured productivity was generally negative in service industries even where anecdotal evidence indicated that processes had been streamlined, products had been substantially improved, as well as greatly proliferated, and the people in the industry believed they were doing a much more effective job serving their customers. economists freely admitted they didn ’ t quite know how to identify and measure the quality of the products that were being produced in service industries, sometimes even in manufacturing. economists also wondered aloud why all the investment in computers and information technology that was so obviously changing the world was not having an impact on productivity. we opined that maybe people weren ’ t using computers very well or that many things people were using computers for - - like editing everything to death or spelling things correctly - - were not actually contributing to productivity at least as we were measuring it. now, we should turn all this speculation - 4into a full court press to figure out what kind of data we need and what kind of analytical methods we need to invent in order to understand better what is going on in this economy. the need to improve the accuracy of the cpi has captured the attention of the press and the politicians because the indexing of benefits and tax brackets plays such a large part in the federal budget. but the problems of identifying what consumers are buying and how the quality of the items purchased has changed is very closely related to the problem of identifying what is being produced and what inputs are going | 0.5 |
s s mundra : re - emphasizing the role of compliance function in banks keynote address by mr s s mundra, deputy governor of the reserve bank of india, at the centre for advanced financial research and learning ( cafral ) conference of chief compliance officers in rbi, mumbai, 27 august 2014. * * * assistance provided by ms ranjana sahajwala in preparation of this address is gratefully acknowledged. 1. shri g. gopalakrishna, director, cafral ; shri p. r. ravi mohan, chief general manager - in - charge, department of banking supervision, reserve bank of india ( rbi ) and the conference participants! it is a pleasure for me to deliver the keynote address at this conference of senior representatives of the compliance departments of commercial banks. across the globe, it is an accepted fact that compliance is an area that warrants considerable attention. in recent times, the emergence of compliance function as an area of greater focus is an acknowledgement of the damaging impact of non - compliance, not only on an entity ’ s own reputation but, more broadly, also on the confidence in the system. regulators, supervisors and international standard setters have become increasingly cognizant of the fact that merely enacting rules and regulations is a futile exercise unless these are complied with, both in letter and spirit, by the regulated entities. not surprisingly, on account of a bigger push from the regulators / supervisors, the compliance function has assumed massive significance within the bank ’ s internal structure and organization. in my address today, i intend to talk about the relevance of compliance function within the bank ’ s overall business strategy, operations and conduct and re - emphasize some of the key elements of the compliance framework that we would want to see in practice in our banks. background 2. it has been some time now since the global financial crisis ( gfc ) first broke in 2008, extending its impact across the globe over time. indeed, complete recovery of the financial system from the strenuous impact of the crisis is yet to be accomplished. the years since the crisis have extensively been dedicated by international standard setters and domestic authorities to both enhancing and reorienting financial sector regulations to ensure the sector ’ s resilience in the face of present and future problems. however, even while standard setters and regulators have remained engaged in plugging the regulatory loopholes, several instances of misconduct on the part of banks continue to come to light, which keep reminding us of the need to ref | bcbs ) and the financial stability board ( fsb ) have now put in place peer review mechanisms to ensure that national jurisdictions comply with international standards in right measure and spirit. these are in addition to the existing assessments of compliance of jurisdictions to international standards done by the international monetary fund ( imf ) / world bank, under the financial sector assessment programs ( fsaps ). within national jurisdictions, regulators / supervisors and financial sector entities have realized the significance of the compliance function in ensuring good conduct of business at the entity level and facilitating a safe and sound banking system at the systemic level. consequently, assessment of compliance is increasingly being focused on in supervisory oversight. is compliance a specific risk area? 8. the basel committee on banking supervision, in its guidance “ compliance and the compliance function in banks ”, issued in april 2005 states “ the compliance function is an independent function that identifies, assesses, advises on, monitors and reports on the bank ’ s compliance risk, that is, the risk of legal or regulatory sanctions, material financial loss, or loss to reputation a bank may suffer as a result of its failure to comply with laws, regulations, rules, related self - regulatory organization standards, and codes of conduct applicable to its banking activities ”. 9. what is the “ compliance risk ” referred to above? is it an independent risk that banks need to manage just as they manage credit risk, market risk or operational risk? is it a subset of another risk or is it simply a function that needs to be performed as part of banking bis central bankers ’ speeches business? in the era of traditional banking business, simple products, and intense regulation, compliance was relatively simple. banks had to comply with the provisions of the specific acts and regulations set by the regulators. compliance then could be identified simply as a function to be discharged as part of business. however, with globalization, liberalization, increased adoption and integration of it in the business processes along with the introduction of new, innovative and complex products, the compliance function has gained in stature and significance. while compliance may still not be considered an independent “ risk ” function, over the last few years, it has definitely evolved as an independent function in banks that impacts other risk / s. 10. compliance is generally considered to be a part of operational risk. under basel ii, operational risk is defined as “ the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. this definition includes legal risk, but excludes | 1 |
of interest rate changes on inflation emerges in 2 - 3 years, while the bulk of the effect emerges within about a year. the short - term impact on real variables tapers off within the same time frame. and it follows from this that in order to pursue forward - looking monetary policy with any degree of success, it is necessary to make forecasts. these call for economic analysis and modelling. in order to understand the problems associated with monetary policy implementation, one must bear in mind that statistics relating to the recent past often contain significant measurement errors, that we do not know what the “ right ” economic model is, and that the future is always in some sense unknowable. in other words, monetary policy is always implemented under conditions of uncertainty – to varying degrees, of course. this is why we consider a large number of economic indicators and use several models. furthermore, we do not put a single economist in front of a computer and assign that person the task of determining the monetary stance ; instead, we have a committee that exchanges opinions and assesses the current situation and outlook at the time in question. the observations i have just made are general in nature and apply to large and small countries alike. but we know that monetary policy in small, open economies is accompanied by particular challenges – challenges that we must take into consideration when developing a monetary policy framework for iceland. in this context, it should be noted, first of all, that smaller economies generally have a tendency to be more volatile than larger ones, owing both to less economic diversity and the greater relative weight of individual shocks. second, the relative weight of the tradable sector is often greater than in larger economies. because of this, economic developments are more dependent on the exchange rate, and pass - through from the exchange rate to inflation is generally stronger. third, financial markets are shallower than in larger economies, other things being equal, and this contributes to greater volatility of financial prices. fourth, in an environment of unrestricted capital flows and increasing international financial integration, the possibility for small economies to affect their own financial conditions through monetary policy diminishes. the question then arises : should there be an exchange rate target or an inflation target? the answer is not always straightforward. other things being equal, an inflation target is more appropriate because it stands closer to the factors important to economic well - being, and it is easier to decide what an inflation target should be than to estimate the “ right ” exchange rate target | and has worked well. under normal conditions, interest rates on central bank transactions with financial institutions would continue to be the bank ’ s main monetary policy instrument. foreign exchange market intervention is also a monetary policy instrument, as i have mentioned, and other instruments can also be used, such as reserve requirements and direct intervention in the bond market. their efficacy is generally less certain than with interest rates, however, and as a result they are used less often. the mpc would be entrusted with a capital flow management tool or tools to affect carry trade, of the type i mentioned a moment ago. these tools would not be used against the regular flows that are a normal part of monetary policy transmission ; instead, they would primarily be used when flows became too strong and there is the risk that monetary policy transmission along the interest rate channel would be weakened excessively in implementing monetary policy, the mpc takes into account the impact of monetary policy and its interactions with other aspects of economic and prudential policies, insofar as this is consistent with medium - term price stability. there will be reliable processes for exchange of information, discussion, and analysis of the interactions among these various factors. this will take place through consultations between the ministry of finance and the central bank ; through the proposed macroeconomic council, where the interactions between economic policy and labour market decisions would be discussed ; or in the systemic risk committee and financial stability council and joint meetings of the monetary policy committee and the systemic risk committee. the central bank plans to strengthen these processes still further by launching a new publication next year. the report, which will be issued at least once a year, will focus on the external position of the economy and its sustainability, the outlook for the balance of payments, and the exchange rate and signs of major deviations from the equilibrium exchange rate. honoured guests : the revised monetary policy framework will be finalised in the next few months, before capital controls on residents are lifted. its final form will be a joint declaration by the government and the central bank, like that dating from 2001. the discourse will therefore continue. in this context, i would like to thank the confederation of icelandic employers for having this topic on its agenda today and for giving me the opportunity to express my views on the subject. but we must keep one thing in mind. the new framework will be better than the one we had before the crisis, but it will not be a panacea. monetary policy is limited in terms of what it can deliver | 1 |
bandid nijathaworn : the role of early warning systems in economic policy formulation speech by mr bandid nijathaworn, deputy governor of the bank of thailand, at the panel discussion on “ the role of early warning systems in economic policy formulation ”, imf high - level seminar “ early warning systems and their role in surveillance ”, singapore, 9 february 2010. * * * first, let me thank the imf for the invitation. at first, when i was asked to speak on this panel, i was not sure why the fund is organizing a high - level seminar in asia on early warning systems, as interest on the topic seems to have faded completely with the recovery of the asian economies from the crisis in early 2000 ’ s. then, it becomes clear that the resurgence of interest on ews, now called ewe or early warning exercises, is very much the mandate of the g20 that requires the imf and the fsb to lead the conduct of such exercises in response to the current crisis. given the severity of the current crisis, i think this initiative is important and needs to be supported. for this afternoon, i want to make three observations on how the new early warning exercises can be made most useful to help sustain global growth and maintain financial stability, especially in light of the lessons learned from the current and past crises. my observations will be on : ( 1 ) the nature of future crises ; ( 2 ) their implications for the role and the conduct of ewe going forward ; and ( 3 ) some suggestions on what should constitute the important components of the ewe process. first, on the nature of future crises. one criticism we often hear about ews in the past is that the system is often good in replicating the last crisis but is less useful in anticipating future crises. this point i believe has been echoed also in today ’ s seminar. a key reason for this is the way the ews models have been calibrated to fit the explanation for the last crisis, and hence, becomes less useful for anticipating future crises when circumstances or the risk factor change. similarly, lessons learned from the previous crisis tend to over - prepare policymakers for a repeat of a similar crisis, thereby leaving them vulnerable to the new cause of the next crisis. therefore, for ewe to be useful, it must have the ability to anticipate the nature of future crises with certain accuracy. this, of course, is going to be a demanding task | as reflected in the world bank ’ s latest logistics performance index. thailand has, therefore, been a natural gateway that links extra - regional economies to asean markets. thailand has advantages to be a hub for regional headquarters of multinational companies ; a hub for logistics and distribution activities ; a sourcing hub for regional markets ; and a financial hub for regional markets. however, to remain competitive as a regional hub is a challenging task. bis central bankers ’ speeches 14. to remain as the preferred hub and entry point of the region, we perceive an opportunity for investment from china which has the advantage in capital, construction capacity and technology. as the advantage of low cost factor of productions is rapidly declining, china is facing an urgent need to re - orient supply chains through thailand to enter asean and the greater mekong subregion ( gms ) in particular. china and thailand should therefore make every effort to grasp this opportunity and construct win - win solutions for both sides. ladies and gentlemen, 15. let me conclude that china economic prosperity and advancement provides wide range of untapped opportunities for thailand. they are right here where we are now, in our region. we should seize it and not miss it. and i am confident that so long as we work hand in hand with china, unite together, and embrace the merit of economic integration, the synergy of the two will surely give its fruit on the growing tree. thank you. bis central bankers ’ speeches | 0.5 |
and credit markets. the primary objective of the common monetary policy is price stability. the mandate, clear and unequivocal, given to the european system of central banks is based on two tenets held by the drafters of the treaty : that the stability of the value of money is a public good which does not hinder, but rather fosters, sustainable growth of the real economy ; and that maintaining stability depends crucially on the operation of monetary policy. the european system of central banks will enjoy complete autonomy ; it will regularly provide information on its activities and report on them to the other community institutions. in particular, the european central bank will be required, pursuant to article 109b of the treaty and article 15 of the statute of the european system of central banks, to publish periodic reports on the activities of the escb, with a description of the current and future stance of monetary policy. the european parliament will be able to debate these matters and invite the president and the other members of the executive board of the european central bank to be heard by its competent committees. in particular, the need for a “ single ” monetary policy will have to be reconciled with the principle of “ subsidiarity ”, which has also been embodied in the statute of the escb and is intended to permit the highest possible degree of decentralization in operational terms. more specifically, provision is made for a division of tasks along the following lines : - - the decision - making powers in monetary policy matters, especially with regard to interest rates and compulsory reserves, will be centralized in the european central bank. the ecb will exercise these powers through the governing council, comprising the governors of the national central banks and the executive board, composed of the president, the vice - president and four other members. the executive board will be responsible for implementing the decisions of the governing council on a continuous basis ; the operational implementation of monetary policy will be entrusted to the national central banks. each national central bank will thus have two tasks : it will contribute, through its governor, to the decisions of the governing council ; and it will implement these decisions in its own country. operations in the money and foreign exchange markets will normally be carried out by the national central banks. within this framework, the bank of italy will continue to carry out all the operational functions that it currently performs. the procedures for conducting monetary control operations will be different in part from those used today ; the draft legislative decree currently under discussion in parliament is designed to permit | gabriel makhlouf : protecting consumers remarks by mr gabriel makhlouf, governor of the central bank of ireland, at the publication of the oecd review of the central bank of ireland's consumer protection supervisory functions, dublin, 16 december 2024. * * * thank you and welcome to this special event to mark the publication of the oecd's report on the central bank's financial consumer protection role. this is the first review of its kind by the oecd and, given our shared commitment to financial consumer protection, we at the central bank are very pleased to be a pioneer in this work with you. we put ourselves forward for this review as we welcome the opportunity for our work to be assessed against global standards by an independent, objective third party. and we are very conscious of the oecd's central role in establishing the global standards through the g20 / oecd high - level principles on financial consumer protection. consumer protection is at the heart of everything we do in the central bank, aligned to our constant and predominant aim being the welfare of the people as a whole. over the last decade, we have, alongside other public institutions, played a significant role in strengthening the consumer protection framework in ireland, to ensure that our system and protections are in line with those global standards. while this strengthening of the framework has improved supports and outcomes for consumers, we also recognise the importance of ensuring that the framework – like all frameworks – continues to adapt and evolve so that it remains fit for purpose and futureready. the challenges and risks facing us are clear. the global economy is fragmenting and countries across the globe are undergoing significant economic transitions – in demography, in technology, in climate – while also experiencing a period of unprecedented innovation. consumers are adapting and in the face of a changing ecosystem, central banks, regulators, and businesses have to adapt, evolve and transform as well. the value provided by the oecd, given their knowledge of how countries and regulators across the globe are facing into these challenges, is clear. for our part, we are changing how we work and ensuring our frameworks reflect an increasingly digital world. as the financial services sector evolves, so too must our approach to supervision and regulation to ensure it remains fit for purpose. this need to adapt, evolve and transform is at the core of our strategy. a key element of this is the work we are finalising on our review of the consumer protection code | 0 |
speeches | of liquidity, especially in us dollars. in the final quarter of 2008 we faced a situation in which our financial institutions were facing liquidity pressures, owing to the market reaction to the lehman brothers failure. to offset the liquidity outflow that had taken place after the bankruptcy of lehman brothers, the central bank instituted a new swap facility that permitted banks to exchange us dollars for bahrain dinar at no penalty. this helped greatly to ease liquidity conditions in bahrain ’ s money markets and allowed the 2008 year - end to pass without any significant market disruptions. as 2009 unfolded, liquidity pressures gave way to rising credit losses. within bahrain itself, losses reported by banks have been in line with those we would expect in a normal business cycle. the domestic impact of the crisis has been limited in large part due to the fact that our real estate market had not experienced high levels of speculative activity. however, since bahraini banks are major providers of credit throughout the mena region, they have been affected by credit defaults elsewhere, and by problems in the real estate sector elsewhere in the region. nonetheless, the high levels of capital adequacy of our banks has allowed them to absorb these losses and the banking system remains on a very solid footing. a further source of strength for bahrain ’ s financial sector has been our position as a hub for islamic finance. owing to the sharia prohibition on speculative activity and the requirement that financial transactions be backed by real assets, the islamic financial industry has been less affected by the global financial crisis than the conventional sector. while this sector has no room for complacency, as its customers are just as likely to suffer from the economic downturn as those of conventional banks, we nonetheless believe that there are enormous opportunities for sharia - compliant finance to take up some of the slack created by problems in the conventional financial industry. the sukuk market, in particular, is one that we believe provides a flexible financing mechanism which contains enormous potential. with bahrain ’ s long track - record and supportive regulatory regime for islamic finance, we believe that this is an aspect of the financial sector that is ripe for further development. let me again welcome you to bahrain and thank you for your participation in this important event. | 0 |
ground. this not only applies to mobile and contactless methods as well as internet payment methods, but also to regular debit card payments. so how does the future of payments look? in my opinion, diverse and multifaceted. in the past, paying in cash was virtually the only option, and cash is still going strong even today. the volume of euro banknotes in circulation, which increases by around 5 % a year and has been in excess of €1 trillion since the end of 2014, clearly demonstrates this. but nowadays, there is also a wealth of cards – ranging from prepaid cards to contactless cards. moreover, smartphone and e - mail - based methods offer new channels to existing payment procedures. everyone should be able to pay as he or she wishes ; the bundesbank takes a neutral stance and leaves citizens to decide how they would like to pay. thank you very much for your attention. bis central bankers ’ speeches | us, and you debated with us. thank you all for getting involved. my gratitude also goes out to all those who made our focus session such a success – everyone who spoke and participated in discussions, and of course the many helping hands in the background whose job it was to prepare and organise today ’ s event. ladies and gentlemen securities settlement and payments are a network industry. what would be more apt, then, to network at a joint reception to which you are now all cordially invited. join me there in celebrating the successful migration of the german market to t2s. thank you for your attention. 4 / 4 bis central bankers'speeches | 0.5 |
the equity of substantially all of aig's regulated subsidiaries. example, nonconforming jumbo mortgages – cannot be securitized and thus carry much higher interest rates than conforming mortgages. some lenders have reduced borrowing limits on home equity lines of credit. households also appear to be having more difficulty of late in obtaining nonmortgage credit. for example, the federal reserve's senior loan officer opinion survey reported that as of july an increasing proportion of banks had tightened standards for credit card and other consumer loans. in the business sector, through august, the financially strongest firms remained able to issue bonds but bond issuance by speculative - grade firms remained very light. more recently, however, deteriorating financial market conditions have disrupted the commercial paper market and other forms of financing for a wide range of firms, including investment - grade firms. financing for commercial real estate projects has also tightened very significantly. when worried lenders tighten credit, then spending, production, and job creation slow. real economic activity in the second quarter appears to have been surprisingly resilient, but, more recently, economic activity appears to have decelerated broadly. in the labor market, private payrolls shed another 100, 000 jobs in august, bringing the cumulative drop since november to 770, 000. new claims for unemployment insurance are at elevated levels and the civilian unemployment rate rose to 6. 1 percent in august. households'real disposable income was boosted significantly in the spring by the tax rebate payments, but, excluding those payments, real after - tax income has fallen this year, which partly reflects increases in the prices of energy and food. in recent months, the weakness in real income together with the restraining effects of reduced credit flows and declining financial and housing wealth have begun to show through more clearly to consumer spending. real personal consumption expenditures for goods and services declined in june and july, and the retail sales report for august suggests that outlays for consumer goods fell noticeably further last month. although the retrenchment in household spending has been widespread, purchases of motor vehicles have dropped off particularly sharply. on a more positive note, oil and gasoline prices – while still at high levels, in part reflecting the effects of hurricane ike – have come down substantially from the peaks they reached earlier this summer, contributing to a recent improvement in consumer confidence. however, the weakness in the fundamentals underlying consumer spending suggest that household expenditures will be sluggish, at best, in the near | firms. the federal reserve, with which fhfa consulted on the conservatorship decision as specified in the july legislation, supported these steps as necessary and appropriate. we have seen benefits of this action in the form of lower mortgage rates, which should help the housing market. the federal reserve and the treasury attempted to identify private - sector solutions for aig and lehman brothers, but none was forthcoming. in the case of aig, the federal reserve, with the support of the treasury, provided an emergency credit line to facilitate an orderly resolution. the federal reserve took this action because it judged that, in light of the prevailing market conditions and the size and composition of aig's obligations, a disorderly failure of aig would have severely threatened global financial stability and, consequently, the performance of the u. s. economy. to mitigate concerns that this action would exacerbate moral hazard and encourage inappropriate risk - taking in the future, the federal reserve ensured that the terms of the credit extended to aig imposed significant costs and constraints on the firm's owners, managers, and creditors. the chief executive officer has been replaced. the collateral for the loan is the company itself, together with its subsidiaries. 1 ( insurance policyholders and holders of aig investment products are, however, fully protected. ) interest will accrue on the outstanding balance of the loan at a rate of three - month libor plus 850 basis points, implying a current interest rate over 11 percent. in addition, the u. s. government will receive equity participation rights corresponding to a 79. 9 percent equity interest in aig and has the right to veto the payment of dividends to common and preferred shareholders, among other things. in the case of lehman brothers, a major investment bank, the federal reserve and the treasury declined to commit public funds to support the institution. the failure of lehman posed risks. but the troubles at lehman had been well known for some time, and investors clearly recognized – as evidenced, for example, by the high cost of insuring lehman's debt in the market for credit default swaps – that the failure of the firm was a significant possibility. thus, we judged that investors and counterparties had had time to take precautionary measures. while perhaps manageable in itself, lehman's default was combined with the unexpectedly rapid collapse of aig, which together contributed to the development last week of extraordinarily turbulent conditions in global financial markets | 1 |
purchase ; the amount for 2007 is $ 417, 000. jumbo loans are thus a type of " nonconforming " loan. prime loans are those made to borrowers with good credit records. issuance of speculative - grade bonds dropped off sharply as risk spreads widened. and although equity prices have moved up on balance since late spring, swings in prices have been large ; indeed, the expected stock - price volatilities implicit in options prices roughly doubled during the summer before falling back more recently. as the strains in financial markets intensified, many of the largest banks became concerned about the possibility that they might face large draws on their liquidity and difficult - to - forecast expansions of their balance sheets. they recognized that they might have to provide backup funding to programs that were no longer able to issue abcp. moreover, in the absence of an active syndication market for the leveraged loans they had committed to underwrite and without a well - functioning securitization market for the nonconforming mortgages they had issued, many large banks might be forced to hold those assets on their books rather than sell them to investors as planned. in these circumstances of heightened volatility and diminished market functioning, banks also became more concerned about the possible risk exposures of their counterparties and other potential contingent liabilities. these concerns prompted banks to become protective of their liquidity and balance sheet capacity and thus to become markedly less willing to provide funding to others, including other banks. as a result, both overnight and term interbank funding markets came under considerable pressure. interbank lending rates rose notably, and the liquidity in these markets diminished. a number of the u. s. abcp programs that had difficulty rolling over paper were sponsored by or had backup funding arrangements with european banks. as a result, some of these banks faced potentially large needs for dollar funding, and their efforts to manage their liquidity likely contributed to the pressures in global money and foreign exchange swap markets. the u. s. subprime mortgage market is small relative to the enormous scale of global financial markets. so why was the impact of subprime developments on the markets apparently so large? to some extent, the outsized effects of the subprime mortgage problems on financial markets may have reflected broader concerns that problems in the u. s. housing market might restrain overall economic growth. but the developments in subprime were perhaps more a trigger than a fundamental cause of the financial turmoil. the episode led | 2012 period and the preconditions for sustainable growth are now in place. indeed, the result of these adjustments may already be seen in the 2013 economic performance, which hopefully marks a turnaround in romania ’ s economic development : rapid economic growth ( judged by the current eu standards ), sizeable adjustment in the current account deficit, historically low inflation, while keeping the fiscal deficit well below 3 %. as a result, romania is now fulfilling three out of the four maastricht criteria, namely the sustainability of the fiscal position, convergence of long - term interest rates and exchange rate stability ( although we are not technically in erm ii ). meeting the price stability criterion is probably just a matter of months, until the recent low inflation numbers feed into the 12 - month average rate used as a reference. this is especially relevant now in the context of the recent political consensus that romania should aim at adopting the euro by 2019. however, the recent economic european developments have taught us that only the fulfilment of nominal convergence criteria is not enough. the key is to pull this off consistently. setting a target date for euro adoption should act as a catalyst for sound bis central bankers ’ speeches economic policies. romania has a five year period in which to check whether the abovementioned achievements are here to stay and to demonstrate significant progress in real convergence area, where we still have a lot of catching - up to do. another lesson of the recent crisis is that a monetary union cannot function properly in the absence of a fiscal counterpart. in today ’ s europe, it is hardly imaginable that a consensus on the latter is rapidly achievable. the closest substitute – which is supposed to break the vicious circle between sovereigns and banks – is the banking union. romania is a supporter of this initiative as adhering to the banking union will strengthen financial stability and further increase confidence in the national banking sector through the harmonisation of supervisory practices and deposit guarantee schemes and avoiding regulatory arbitrage. in the long run, banking union will foster sustainable lending and economic growth ( by reducing the fragmentation of the european financial markets ). in the particular case of romania, it makes even more sense to support the project given the share of foreign capital in our banking system. furthermore, it is always preferable to have a voice in the setup of a mechanism the existence of which will affect all eu member states, especially since – irrespective of their current choice – all will eventually end up as | 0 |
delisle worrell : the barbados ibfs sector and the efficiency of international commerce lecture by dr delisle worrell, governor of the central bank of barbados, at the carleton university, ottawa, 17 september 2015. * * * small international business and financial services ( ibfs ) centres like liechtenstein, guernsey, the caymans and barbados – to take a random selection – have an enduring place in international commerce, because they serve to make the international system more efficient. through the services that international companies locate in these centres, companies are able to offer products and services to the global market more cost effectively than they would otherwise be able to do. it is because of this economic reason that the foremost centres have proven so resilient, in the face of repeated waves of misrepresentation. the truth, as i will show in this presentation, is that international firms that use subsidiaries in ibfs centres to locate appropriate aspects of their global operations, are more competitive than those that do not. the sources of ibfs competitiveness vary by country, and include the expertise available in the centre, its global interconnectedness, the local penetration of information and communications technology ( ict ), the quality of life available in the centre, the quality of infrastructure, and many others. importantly, most centres will offer local expertise that is on par with london, new york and singapore, at significantly lower costs than would be the case for the large global financial centres. in this essay we cite evidence of barbados ’ competitive standing in international financial markets. how ibfs centres contribute to global efficiency the main factors which make international firms that use well regulated, well networked ibfs centres more efficient than the competition include : • such centres may reduce market frictions and information costs to the international firms whose subsidiaries they host ; • they are able to offer internationally comparable skills at lower wages and other costs ; and • they offer a corporate tax regime which provides for lower taxes on value added in the export of goods and services. because of these factors the ibfs centre is able to offer benefits to producers and consumers of ibfs goods and services, while at the same time providing an economic benefit to the host country. the investing company is able to produce the services located in the ibfs centre for sale in third countries at significantly lower cost, with no sacrifice in quality. the third country receiving the finance, product and / or service is able to access the output at a more attractive price. the benefit to the ibfs | by establishing and maintaining consistent engagement with our partners, the bsp is able to capture the sentiment of its stakeholders, which helps us formulate and calibrate effective monetary policies. through the years, your support has become increasingly more important in our various initiatives and advocacies directed toward the fulfillment of our mandates. for instance, in july 2017, the bsp launched the bsp e - survey portal that features an online questionnaire, database, and an application for data maintenance and consolidation system. in 2018, the portal ’ s registered users increased to 1, 706 from the 860 registered users in 2017. and, as of end - june of this year, the number of registered users rose to 2019. this is one of the many endeavors of the bsp that highlight the importance of the information support you provide us to aid in our policy formulation. the bsp has, likewise, responded to the call of digitization by pioneering the national retail payment system ( nrps ). the nrps is a policy and regulatory framework to establish a safe, efficient and reliable retail payment system in the philippines. with this initiative, digital payments have become more accessible to every filipino. we, at the bsp, cannot stress enough how you have taken a pivotal role in helping the financial sector develop in this age of fast - paced technological advancement and integration. today, as we celebrate our rewarding partnership, we must also reflect on the motivations behind it. this year ’ s theme, “ one team one goal : resilient partnership towards inclusive economic growth, ” highlights the fact that the bsp cannot do it alone. with your support, the bsp is able to continuously craft policies that are appropriate for the nation. ladies and gentlemen, by working as a team, we will be more than ready to face the challenges head on and deliver on our common goal of achieving sustainable and inclusive economic growth and development in the philippines. 2 / 3 bis central bankers'speeches thank you and congratulations to all our outstanding partners! 3 / 3 bis central bankers'speeches | 0 |
axel a weber : developing a long - term investment perspective favouring financial stability and growth introductory remarks by professor axel a weber, president of the deutsche bundesbank, at the eurofi financial forum plenary session 16 on “ defining a common regulatory and supervisory basis to achieve resilience, growth and competitiveness ”, brussels, 29 september 2010. * * * ladies and gentlemen the financial crisis has painfully demonstrated vulnerabilities of our financial system. strengthening the resilience of the financial system, that is of financial markets and their players, is therefore the top priority when it comes to learning the lessons of the crisis. closing the regulatory gaps which the crisis has revealed – however important that is – would be too little. financial reform has to go beyond that and establish the necessary institutions and regulations to deal with systemic risks. financial reform will not save us from any future financial crisis but it can significantly dampen the frequency and intensity of financial crises in the future. reducing the likelihood of individual bank failures may act in this respect as a first line of defence. the most important project in this regard is the revision of basel ii. this reform will significantly increase the risk buffers of individual financial institutions by introducing stricter requirements regarding the quality and quantity of bank capital. while the new rules require banks to increase their capital, the provision of transition periods enables them to adapt to the more restrictive capital and liquidity requirements. hence, i am not afraid that the implementation of basel iii might significantly impair the lending capacity of banks or hamper economic recovery. while being subject to considerable uncertainty, recent comprehensive impact studies by the basel committee and the financial stability board suggest the economic impact during the transition period will be moderate and that the long - term net benefits will be positive. now it is up to the g20 heads of state and government to approve the package at their seoul summit in november. its global implementation afterwards is of utmost importance in order to guarantee a level playing field and to prevent regulatory arbitrage. in addition, some elements of the package require further work in the process of finalising the whole. in particular, the extent of anti - cyclicality of capital buffers might be strengthened further, and the requirements of the liquidity buffer in its currently proposed form warrant further adjustment as well : requirements for eligible assets of private issuers, for example, appear rather strict. while the new basel rules will certainly help to make the financial system of the future safer and more stable, a second line | rules of the game ” governing international payments have ebbed and flowed. so it is not surprising that france has chosen the international monetary system as a theme of its presidency of the g20 this year. why not leave these issues to market forces? what are the externalities in the international monetary system which mean that one country ’ s actions distort the choices open to others? the main externalities in today ’ s international monetary system are most visible in the interaction between the advanced and emerging economies. the rising importance of the emerging economies has perhaps been the most important development since the bretton woods framework of fixed exchange rates was abandoned in the early 1970s. china and india alone have brought 2 ½ billion people into the world trading system, with many more in other countries such as brazil and russia. and over the next five years, emerging economies are expected to account for almost three quarters of total growth in world output. trade has promoted development in china and other emerging markets, and has benefited the rest of the world as the costs of a range of traded goods and services, particularly manufactured goods, have been driven down. but the emergence of the accompanying imbalances in current accounts had huge effects on the global pattern of spending. between 1998 and 2006, annual output in high - saving economies expanded by around $ 10 trillion – $ 1trillion more than the growth in domestic demand in the same economies. the rise in bis central bankers ’ speeches output relative to demand in the high - saving countries was only possible because there were matching capital flows. capital flowed “ uphill ” from many of the emerging markets to advanced deficit economies, not an obvious sign of capital moving to exploit profitable investment opportunities. the deficit countries – predominately the us, uk, australia and countries in the euro - area periphery – were borrowing almost $ 1trillion dollars more each year by 2006 than they had been in 1998. this created unsustainable paths for domestic demand, net debt and long - term real interest rates. whether households or policymakers truly understood how unsustainable these paths were is hard to know. but the extent of the resulting financial fragility became all too apparent in late 2008. credit supply in many of the advanced economies froze, confidence collapsed around the world and private demand fell sharply. output was cushioned only through an unprecedented policy response around the world. that did bring an end to the sharp falls in output, and allowed confidence to recover somewhat. and in many countries | 0 |
david dodge : improving financial system efficiency a€ “ the need for action remarks by mr david dodge, governor of the bank of canada, to the economic club of toronto, toronto, ontario, 11 december 2006. * * * two years ago, i gave a speech here in toronto in which i dealt with the theme of efficiency as it relates to the economy in general and to the financial system in particular. today, i want to return to the theme of financial system efficiency. in doing so, i will draw on material from our latest financial system review ( fsr ), published last week. 1 this publication, for those of you not familiar with it, is one way that the bank contributes to the soundness of the financial system. the fsr reports on developments and trends in financial systems here and abroad, summarizes recent research by bank staff on financial sector policies, and promotes discussion of how to strengthen our financial system. in short, the goal of the fsr is to improve financial system efficiency and stability. when i spoke two years ago, i stressed that all of us need to keep in mind the goal of efficiency, and that canadian financial institutions and markets need to be as efficient as possible. since that time, the global financial services sector has continued to undergo sweeping changes. the integration of global financial markets is continuing. exchanges and financial institutions are consolidating, and new financial instruments are constantly being developed. all of this is changing the way that global markets operate, with important implications for the competitiveness and efficiency of canadian markets and institutions. today, i want to talk about how canada has been responding to these developments. in doing so, i hope to underline just how important efficiency is for everybody who is concerned about canada's long - term economic health. but before i begin, i should start by saying why financial system efficiency is so important. when a financial system is operating at peak efficiency, investors receive the highest risk - adjusted returns on their investments, and borrowers minimize the costs of raising capital. with an efficient financial system, economic resources are allocated to the most productive investments. another key reason to promote efficiency in the financial system is the importance of the financial sector to the industrial base. the financial services sector represents more than 6 per cent of canada's gdp. however, the long - term health of this sector may be at risk unless we all act to increase its efficiency and competitiveness. i'll return to this topic in a few minutes | of the story. the bank recently established the canadian fixed - income forum to enable a continuing dialogue, and we ’ ve modified our operations to help alleviate some of these issues. the governing council believes it ’ s important to continue studying the matter, not just as it pertains to government bonds, but also to other asset classes. given the new regulatory architecture, we may not know just how resilient market liquidity is until there ’ s a true stress event. let me now turn to vulnerabilities being created by persistently very low interest rates in canada. the post - crisis situation has quite naturally fuelled the accumulation of household debt, as well as heightened activity in the housing sector. we can observe other elements of risky financial behaviour, but these two vulnerabilities have been our main focus for some time and have continued to grow in importance since our last fsr. in terms of household debt, income growth hasn ’ t kept pace with increases in borrowing, since mortgage growth continues to rise. more borrowing was expected, given the reductions in our policy interest rate earlier this year. it ’ s important to remember that while rate reductions have increased vulnerabilities at the margin, they ’ ve also mitigated the risk to the bis central bankers ’ speeches financial system by helping offset the decline in incomes and employment tied to the drop in commodity prices. our analysis shows that there has been an increase in the number of highly indebted households in canada, by which i mean those whose debts are more than 350 per cent of their annual gross income. not only are there more of these highly indebted households, they also carry a growing share of household debt. these people are more likely to live in british columbia, alberta or ontario, where house price gains have been the largest. the governing council ’ s reading of the situation is that these vulnerabilities are quite highly concentrated – about 720, 000 households fall into this vulnerable category. in terms of the housing market, we continue to see regional markets evolving along different tracks, as we ’ ve indicated before. activity in the energy - producing regions of alberta, saskatchewan, and newfoundland and labrador has declined noticeably, which was expected following the decline in oil prices. the housing markets of toronto and vancouver have seen renewed momentum, driven by stronger employment growth and migration, both interprovincial and international. the governing council ’ s base - case scenario continues to be a constructive one : housing activity should stabilize in | 0.5 |
especially then – institutions must therefore stick to the reform path they have embarked upon. their willingness to do so is not just in the interests of the individual institutions. for it is only when banks and savings banks in germany fare well as a whole that they can fulfil their central economic function – and when they do that they ultimately serve us all. thank you for your attention. 1 deutsche bundesbank, monthly report, february 2017. 2 dombret, gunduz, rocholl ( 2017 ) : " will german capital? ", deutsche bundesbank discussion paper no 01 / 2017. banks earn their cost of 3 deutsche bundesbank, monthly report, september 2015. 4 the results of the last survey, at : www. bundesbank. de / 348250. carried out in september 2015, are available online 5 " the revolution is over. long live the revolution! ", speech by sam woods at the city banquet, mansion house, london, 26 october 2016. 5 / 6 bis central bankers'speeches 6 federal reserve bank of minneapolis, economic policy paper 13 - 3 : " quantifying the costs of additional regulation on community banks. " quoted in the economist ( 11 february 2017 ) : " the litter of the law. " 7 deutsche bundesbank, bank office statistics 2007, 2015. 6 / 6 bis central bankers'speeches | andreas dombret : the challenges currently facing the german banking sector speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the annual reception of the regional office in bremen, lower saxony and saxony - anhalt, hanover, 6 march 2017. * * * 1. introduction ladies and gentlemen mr von stenglin as well as the chance to eat, drink and be merry, a reception such as this is always a good opportunity to take stock of events and to look ahead at what the future might hold. today, i would like to do just that, with a specific focus on the german banking sector. nine years on from the outbreak of the financial crisis, the overall economic situation in germany is relatively positive. activity is robust, and the german economy recorded growth of almost 2 % last year – its best performance since 2012. 1 germany ’ s unemployment rate has also fallen every year since 2010. many sectors in germany are feeling the benefit of the economic recovery, not least the banking industry. lending to the real economy has been back on the rise since 2013. and in any case, german banks and savings banks weathered the crisis comparatively well, owing, among other things, to the highly diverse nature of the german banking sector. what is more, the post - crisis period has seen credit institutions strengthen their capital base and scale back the risks on their balance sheets. things are looking pretty rosy, you might think. but a glance at the current sentiment within the industry reveals that things most certainly are not rosy. banks and savings banks are facing momentous challenges. the reasons for this vary from one institution to the next. but there are some challenges that affect them all in equal measure. as i see it, three key factors are at play here. first, the persistent low - interest - rate environment, which is bringing to light the weak profitability afflicting many german institutions. second, the global regulatory efforts embraced after the crisis, which still haven ’ t been wrapped up and will force us to make substantial adjustments here in germany, too. and last but not least, the advance of digitalisation, which, perhaps more than any other factor, represents both a challenge and an opportunity. these three challenges deserve particularly close attention because if institutions are to overcome them, they will have to start taking decisive action today. but to do so, they first need to get a sound grasp of the situation. so let ’ s take a closer look at what exactly | 1 |
shocks originating elsewhere. there is no longer any need for a cross - border structure for a country to be infected by an external shock. 5 l. bini smaghi ( 2007 ), “ consolidamento bancario, innovazione e accesso al credito, cesifin, florence, 10 december 2007, available at http : / / www. ecb. int / press / key / date / 2007 / html / sp071210. it. html. see also bruegel ( 2007 ) : “ coming of age : report on the euro area ”, bruegel blueprint 4. third, although it is not in principle an optimal model of financial regulation, the recent market turbulence has revealed structural weaknesses in some supervisory systems. in particular, it has shown the need to ensure that the central banks, which are responsible for supplying the markets with liquidity, especially in emergency situations, have all the necessary information at their disposal in order to assess the capital adequacy and sound balance sheets of their counterparties. the ecb had drawn attention to this in the past. 6 finally, the supervisory authorities appear less protected than the central banks from external pressures, which aim to reduce their decision - making autonomy. the concept of independence, which has been developed for monetary policy, is however not easily extendable, merely via regulations, to the supervisory authorities. this, however, also applies to the problem of accountability. 7 in a financial market in which there is room for a certain degree of regulatory competition and in which the supervisory authorities have a mandate and a predominantly national system of accountability, there may be incentives to utilise the margins for manoeuvre that european legislation leaves for protectionist purposes. there may also be disincentives for a proper exchange of information, necessary in order to guarantee the stability of the market. the risk of harming the financial institutions of one ’ s own country and of exposing them to possible acquisitions may discourage a timely transmission of the information to other authorities, especially in periods of financial turmoil. in brief, the developments under way in the financial markets are causing two types of problem to emerge. first, the continual integration of markets increases the inefficiencies resulting from a variety of laws, or applied in different ways in different countries. second, the possibility of applying the laws in various ways reduces the incentives for proper coordination between national supervisory authorities in respect of the prevention and resolution of crises. | firms and households across the euro area. these actions have pulled the euro area back from the very dangerous situation we faced last year. but the crisis of public and private debt in some countries is clearly not over. the recent rise in spanish yields is evidence of this. this is no longer a problem that can be addressed through bigger firewalls or a more active ecb. it can only be addressed through consistent and determined reform, even if it is painful in the short term. in the spanish case the shift in market sentiment is a result of poor communication on deficit targets and delays in announcing the budget. in other words, spain currently has a credibility problem with the markets. but this can be fixed by taking measures to regain credibility. overall, we should not wait for a “ silver bullet ” to end the crisis. it does not exist. the end of the crisis will come only after a series of comprehensive steps taken over a number of years. this means all member states and eu institutions playing their part. let me stress that we are greatly helped in this task by excellent transatlantic cooperation, not least between the ecb and the federal reserve. among other things, the provision of dollar swaps lines has been a key weapon in fighting the crisis since 2007. so the u. s. is also playing an important role in supporting the european recovery. is the european response to the crisis killing growth? this leads into my second question : is the response i just described – fiscal consolidation and structural reforms – killing growth in europe? it is important to understand that we see things differently in europe and the u. s. in our view, strong public finances are a pre - condition for sustainable growth. we see fiscal consolidation as supporting growth, because it creates confidence effects that will support consumption and investment in the future. certainly, the short term effects of consolidation can be negative. we recognise this. that is why we always recommend that consolidation is accompanied by productivity - enhancing structural reforms. this means inter alia opening up closed professions, increasing the efficiency of public administration and improving judicial systems. these are reforms that will bis central bankers ’ speeches ultimately benefit the majority of people, by increasing the growth - potential of these economies. take the example of spain. the labour market reforms i mentioned are essential to increase employment. the spanish labour market has for too long been organised in a way that protects insiders. this is what lies behind the very high rate of youth unemployment. it may be the case that these reforms | 0.5 |
have increased, driving up housing demand while new housing construction has lagged behind, apart from in the most recent years. the abolition of property tax is also a 4 see the article " the repo rate in the long run ” in the february 2017 monetary policy report, sveriges riksbank. 5 factor that might explain the growing indebtedness, as is the fact that an increasing number of households own their own home. 5 the rate of increase in lending to households is still on a high level. the riksbank ’ s assessment of future developments is that overall household debt will not rise at quite such a high rate as in recent years, due to more subdued housing price growth. but debt is still expected to increase more rapidly than disposable income. so the debt - to - income ratio will continue to rise. high indebtedness is making household finances more sensitive to interest rate adjustments when monetary policy gradually starts to normalise and interest rates rise, it will happen against this backdrop of high indebtedness among households and high housing market valuation. in addition, many have taken out variable - rate mortgages with short interest - rate fixation periods. taken together, this means that household finances are now more sensitive to adjustments in interest rates than before. disposable income, that is income minus borrowing costs, is affected to a greater extent by interest rate adjustments when debt is high, all other factors being equal. calculations show that an interest - rate rise of about 1 percentage point now has a significantly greater direct effect on household disposable income than in the mid1990s. in this sense, households ’ interest - rate sensitivity is now greater. 6 the interesting question is whether households adapt their consumption to a corresponding degree so that consumption also changes to a greater extent. it need not necessarily be so. for example, interest income can offset the effect of higher interest expenditure. if households also plan in advance for a scenario where interest expenditure takes a greater share of their income, consumption may not necessarily be affected to any great extent. but research findings point to this potentially playing a major role at least for certain groups of households. 7 more specifically, it is shown that highly indebted households with variable - rate mortgages adapt their consumption to a greater extent than other households when interest rates change. this may be due to an interest rate adjustment affecting their disposable income to a greater extent, as i just described. but it may | impression of the effects on prices of a 15 - per cent depreciation in the krona. let us assume a pass - through to import prices equivalent to half of the change in the exchange rate. this means that they will rise by 7. 5 per cent. 9 if one assumes that these prices constitute 30 per cent of the consumer price index ( cpi ), this means that consumer prices will rise by just over 2 per cent as a consequence of the change in the exchange rate. according to this rough estimate, the pass - through from the nominal exchange rate on the cpi is thus around 15 per cent. 10 as the exchange rate fluctuates substantially, it may nevertheless entail fairly large effects on inflation, although the calculations in the example can be taken with a pinch of salt. 11 we assume here that prices of imported goods in the consumer sector rise by 7. 5 per cent. a 50 - per cent impact on import prices, which comprise around 30 per cent of the cpi, gives a 15 - per cent exchange rate pass - through to the cpi. see also the article “ the path of the krona and inflation ” in ir06 : 1 the effects of the exchange rate on the real economy one can usually expect a weakening of the exchange rate to lead to a positive effect on net exports. however, experiences show that it may take time before exchange rate changes have an impact on foreign trade. in the short term, the value of imports adapts in that import prices in kronor rise as a result of the weaker exchange rates. the initial effect of a weaker exchange rate on net exports can thus be negative. however, in the slightly longer term producers and consumers adapt and export and import volumes are affected. when the exchange rate weakens, exports increase while imports decline, as domestically - produced goods and services become relatively cheaper. the effect of a weakening in the exchange rate can thus be that net exports follow what is known as a j curve ; first they weaken and then they improve. 12 in the long term one can thus expect a weaker exchange rate to lead to increased net exports, which in turn has a positive effect on total production ( gdp ). overall view is important although it may be informative to reflect on the isolated effects of exchange rate changes on the economy, it is difficult to know what causes what. at the same times as the krona weakened in connection with the financial crisis, production fell substantially, partly as a result of a large | 0.5 |
do different structures affect the optimal rules for transparency and liquidity in each market? is the canadian situation unique? and what lessons can be learned from the experiences of other countries? the bank recently held a workshop on these and related topics, with input from many financial market participants. a summary of this workshop will appear in our next financial system review. market microstructure will continue to be an important area of research at the bank and, i hope, in the canadian academic community as well. payment, clearing, and settlement systems. so far, i've talked about issues related to the architecture of the financial system. but as researchers, it is also important to pay attention to the plumbing - the critical infrastructure that supports the activities of institutions and markets. so let me ask a few questions regarding payment, clearing, and settlement systems. as i mentioned, the bank of canada is responsible for the oversight of those systems that have the potential to pose systemic risk. of course, financial service providers are major participants in these systems. at the bank, one major research project involves efforts to model payment, clearing, and settlement systems so as to better understand how they work. further research into the best oversight processes for these systems is also a priority. while the bank's objective is to see that risks are minimized, we need to do so in ways that do not unduly inhibit the development of even more efficient systems. do any current practices create unnecessary inefficiencies? what issues are raised by the current drive towards straight - through processing? how can cross - border clearing and settlement be improved, particularly where the ownership of securities and the posting of collateral are involved? conclusion as you can see, there are still many questions that need to be answered. there are still gaps in our knowledge, and the need to fill these gaps is pressing. you, as academics and researchers, can do your part so that policy - makers, supervisors, and institutions are all better informed and more productive. as i said earlier, canada's economic health depends on a strong financial services sector. so your work is crucial, not just for the bank of canada, but for all canadians. i hope that i have been able to convince you that there are many research topics that are not only inherently interesting for academics, but relevant for public policy. i look forward to you filling the gaps in our knowledge. | reason is that the cpi is the measure of inflation most familiar and relevant to canadians. choosing a well - known indicator as a target makes it easier to explain our actions and to be accountable. second, why do we have a range? this is because there are some components of the cpi - such as some energy and food items - whose prices tend to move a lot, both up and down. these movements can cause large fluctuations in the index. if we tried to target inflation too precisely, we would then be adjusting our policy interest rate sharply and frequently, which would lead to greater instability in the economy. having a range reflects the inherent volatility of the cpi. but to be clear, the range is not a zone of indifference - we do aim to achieve the 2 per cent target. another concern is that this volatility can obscure the underlying trend of inflation. so for operational purposes, we use a measure of core inflation. this measure strips out eight of the most volatile components of the cpi and the effect of changes in indirect taxes on the rest of the items. in this way, core inflation provides a better forward - looking indicator of the trend of inflation. finally, since today's monetary policy actions only affect future inflation, we needed to choose a time frame in which to achieve our target. from the beginning, we said that if inflation was pushed off target, we would conduct monetary policy so as to return inflation to target over a period of 18 to 24 months. this is because research has suggested that historically it takes 12 to 18 months for changes in interest rates to have most of their impact on output, and 18 to 24 months to have most of their impact on prices. of course, there is always uncertainty about the lags involved, and i'll have more to say about this later on. before i move on, i want to emphasize three points about our inflation - targeting framework. the first is that we operate in a symmetric way, and we make it clear to everyone that we do so. by this, i mean that we worry just as much about inflation falling below target as we do about it rising above target. when the demand for goods and services pushes the canadian economy against the limits of its capacity, and inflation is poised to rise above target, the bank will raise interest rates to cool off the economy. and when the economy is operating below its production capacity, and inflation is poised to fall below target, the bank will lower interest rates to stimulate growth | 0.5 |
in turn, speeds up income. it also makes financial products and services accessible to a greater number of people, which in turn, enhances financial inclusion. in october last year, the bsp launched the digital payments transformation roadmap. our goal is to shift from a cash - heavy to a cash - light society, where at least half of financial transactions are done digitally. by 2023, our other goal is that at least 70 percent of the adult population should have financial accounts. 1 / 2 bis central bankers'speeches it is worth noting that in the wake of the pandemic, financial transactions coursed through digital platforms instapay and pesonet rose dramatically by 155. 4 percent and 22 percent, respectively, in may 2021 as compared to the same period in 2020. last year, more than eight million electronic money accounts were created. we expect more as the bsp approves the license applications of incoming industry players. the establishment of digital banks will bring about greater efficiency and extend the reach of financial products and services among the unbanked, including msmes. we have also taken steps to allow for more extensive use of qr codes for payments. last april, we extended the payments use case of the qr ph to include person - to - merchants or p2m. compared with using point - of - sales terminals, qr technology presents small merchants with a simpler and more affordable payment facility. the bsp also supports the philippine id system or philsys because this will address the lack of identity documents which is among the most common barriers to account opening. to help us spread the gospel of financial inclusion and digitalization, we recently partnered with our youth, and hopefully, made enthusiastic ambassadors of them. we held our first - ever bsp youth summit last july 9 with the theme, “ ibangon natin ang ekonomiya, i - digital mo na! ” more than 38, 000 registered for this livestream event, which garnered more than 30, 000 views on facebook as of july 21. eleven youth organizations signed statements of support for our digitalization and financial inclusion agenda. this makes me hopeful that our youth — like you, our dear stakeholders — are strong partners in bringing our services closer to the filipino people. as we make our way toward the new economy, we should be able to transform old ways into sustainable, green ones. so, we start within our own backyard. the bsp launched its internal sustainable central banking program, | benjamin e diokno : 2021 bsp outstanding stakeholders'appreciation ceremony message by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), for the 2021 bsp outstanding stakeholders'appreciation ceremony, 29 july 2021. * * * ladies and gentlemen, welcome to the 2021 outstanding bsp stakeholders appreciation ceremony. our theme, “ pagpupugay at pagkilala : sa gitna ng hamon ng pandemya, ” sums up what we are about to do today — give due recognition to you, our partners, who have gone beyond the call of duty in the name of service at the height of the global health crisis. it has been more than a year since the pandemic began, and, with cautious optimism, we can say that the worst is over. though our economy received big blows because of the pandemic, we started to see green shoots of recovery as early as the third quarter of last year. this is because of the whole - ofnation approach that we, which includes each of you, employed. before the pandemic, we are in what we can call as a position of strength, with ample fiscal and monetary buffer that the country used to respond to the crisis. amid the pandemic, we in the bsp opened our toolkit. we cut policy rate to a historic low of two percent and reduced the reserve requirement to 12 percent — all these to boost market confidence and free up more funds for lending to businesses and households. extraordinary times call for extraordinary measures. with legal safeguards in place, we extended lifeline support to the national government in the form of provisional advances worth p540 billion to augment its resources for covid - related spending. in sum, the bsp injected p2. 2 trillion into the financial system, equivalent to 12. 3 percent of the country ’ s gross domestic product for 2020 as of july 21, 2021. at the same time, we implemented various time - bound regulatory relief measures to enable banks and their clients manage the impact of the pandemic on their finances. these measures range from grace periods for loan payments to capping of interest rates on credit card usage, among others. as we gear up toward recovery, we are also building the foundation of the “ new economy ” through digitalization and financial inclusion. why finance digitalization? financial technology makes transactions easier and faster, which | 1 |
linah k mohohlo : promoting competitive, cost - effective banking in botswana keynote speech by ms linah k mohohlo, governor of the bank of botswana, at the official launch of capital bank lilmited gicc, gaborone, 28 may 2008. * * * i am most grateful to the board and management of capital bank for inviting me to be the guest speaker on the occasion of the launching of their bank in botswana. let me begin by recognising the presence of the governor of the reserve bank of malawi, mr victor mbewe, who has timed his visit to botswana to coincide with the official opening of capital bank. his welcome presence this evening is testimony to the regulatory and supervisory collaboration between the two sister central banks ; the reserve bank of malawi and the bank of botswana. capital bank limited ( capital bank ) is a subsidiary of first merchant bank of malawi, and was granted a commercial banking licence by the bank of botswana in december last year. at the time of licensing first merchant bank ( fmb ), which is headquartered and operating mainly in malawi owned 51 percent of the shares of capital bank. the remaining 49 percent of the shares are held by citizens of botswana, kenya and the united kingdom. one of the attractions of the bank ’ s application for a banking licence was the parent bank ’ s proven track record and strength in financing small and medium scale enterprises ( smes ). as you know smes play a major role in contributing to sustainable economic growth and poverty reduction. therefore, access to credit is crucial for their survival. based on the performance of the parent bank in malawi, it is my hope that capital bank will leverage on its experience and infrastructure in servicing this niche market in botswana, and in so doing, contribute to sustainable economic growth and job creation. i am further encouraged to learn that capital bank has expressed commitment to offer good quality service, accompanied by positive real interest rates on savings and competitively priced banking products. this suggests that the bank is fully aware that it will grow its business and prosper only when customers receive the standard and quality of service to which they are entitled. master of ceremonies : capital bank establishes its presence in botswana at a time when competition in the banking sector is intensifying. you will recall that in 2006, the market witnessed the entrance of a regional bank ; and hot on the heels of that bank, capital bank has come to being ; this brings the number of commercial banks operating in our country to | as well. the oecd estimates that nearly one in ten occupations could be automatable over the next few years. 10 politicians have a responsibility to create the conditions needed for new, future - proof jobs. people who are affected by globalisation or, for example, by digitalisation also have to be capable of recognising and taking advantage of opportunities in a changing environment. education is the key to this. in a recent interview, nobel prize winner robert shiller pointed out that the united states has been lagging behind for some years now. in germany, too, the business community has bemoaned the insufficient credentials of many young job applicants. but education cannot just be confined to the first third of a person ’ s life. rather, learning should be a lifelong process. for employers, this basically means that they need to facilitate access to professional training and development for their staff. 6 / 8 bis central bankers'speeches and at the same time, a targeted tax and transfer system should be designed to cushion social hardships. 8 conclusion ladies and gentlemen, the united states, germany and also europe are facing very similar challenges. the persistent economic upswing is giving policymakers greater opportunities to actively shape these challenges – just as it lies in their hands to preserve and strengthen free trade and the rulebased multilateral trading system. i ’ ve already indicated that i currently see no reason to believe the situation will escalate into a fullblown trade war – and that ’ s not chiefly the optimist in me speaking, but the analyst. the particular interests of the countries involved should prevail. in the long term, after all, protectionism leads to a dead end. open, competitive markets, on the other hand, boost productivity and prosperity. they allow everyone to do what they are best at and also ensure that innovation spreads quickly. today, let ’ s use thanksgiving as a chance to be thankful that poverty has decreased and prosperity increased worldwide over the past few decades – the result of competitive, open markets. at the same time, we have to set out the tasks that currently have to be faced, of which there are many. one such important task is to maintain transatlantic links, preserving the partnership between the united states and europe – and germany. on that note, i ’ d like to thank you for inviting me here today. 1 see deutsche bundesbank, the potential macroeconomic impact of us tax reform, monthly report, february 2018, pp | 0 |
enhancing our corporate culture. with our frameworks for governance, risk management and organizational enhancement in place, assessments on where we stand in these areas are nearly completed. we are finalizing our roadmaps toward a bangko sentral that exhibits governance principles which are highly integrated in our policies, systems, processes and practices ; a bangko sentral that exemplifies a values - based culture, with men and women of inspiring leadership, dynamic, achievement - oriented, and acting as one team. revisiting the fundamentals – bsp ’ s mandate as the end of our strategic plan draws near, fundamental questions emerge as we respond to new challenges relating to our mandate. during this past day and a half, we also engaged in a strategic dialogue on how we would like to position bsp, the country ’ s lone monetary authority, in the next medium term. our engaging dialogue on the assessment of seventeen years of monetary policy at the bsp highlighted key issues such as the financial stability dimension of price stability, the operating environment and practice of inflation targeting in emerging market economies like the philippines, and the approach in responding to asset price bubbles. we also had a spirited discussion on the complexity, impact and requirements of pursuing financial stability in bank supervision, bsp ’ s relationships with other regulators, monetary policy and payments and settlements. in this connection, we also looked into the challenges in the payments and settlements system in the context of meeting our goals of monetary and financial stability, as well as in achieving economic efficiency. focusing on the homestretch we are on the final leg of the journey. apart from the sense of urgency this evokes, this reality prompts us to heighten our teamwork and to collaborate more to guarantee our strategic success. looking at our scorecard, the “ reds ” and “ yellows ” pointed out the areas of concern that need the attention of the entire organization – the monetary board, management and staff. we said that we are a strategy - focused and results - oriented organization, and we are determined to prove this true. let us focus our energy to the implementation of the strategic initiatives that will contribute to the attainment of our targets in the medium - term plan. let us continue our efforts in closing the gaps and in addressing the overlaps to achieve the synergy we desire within the organization and in our relationships with external partners. we will deliver on our promise. in staying true to our commitment for continuous improvement, let us keep in mind what our | stakeholders have expressed in terms of areas that still fall short of their expectations. let us draw up measures to effectively address these gaps in our roadmap. fortifying the bsp team for the next medium term as we set our minds on the immediate tasks at hand, let us not lose sight of the future, which we need to plan for strategically. we end our planning exercise today with a question : “ is the bsp poised to face the advent of a new period in central banking, both in the global and regional fronts? ” with our ideals as an institution encapsulated in our new bsp logo, we usher the next medium - term with our continuing pursuit of becoming a world - class monetary authority, with high degree of professionalism and open mindedness to the changes that comes with the evolving demands for best practices in governance and service delivery. on behalf of the monetary board, i affirm our support to management. pursuing our mandate is not an easy task as it requires not only the high - level of competence the bsp is known for, but also strength of character and a courageous heart to protect and contribute to a better quality of life for filipinos. we may have our share of disappointments and discouragements in the conduct of our work, but at the end of the day, we find fulfillment in the fact that we have served our stakeholders well. i urge everyone to continue to help one another in doing our task and with god ’ s blessing see it though its completion. i congratulate all of you and the organizers of this year ’ s performance review and planning event for a job well done. thank you and enjoy the rest of the weekend. | 1 |
with the line supervisors of banks and insurers transparency and accountability. this will not be easy. and in a world of global capital markets, it is unavoidably a shared enterprise. national authorities will fail unless we work together. which is why i am giving this speech here. governor king and i have long believed that the market intelligence available to central banks through our operational roles has a central place in identifying threats to stability, whether exuberance in markets or faultlines in the fabric of the system. if that is true of central banks in general, it is especially so for the bank of england and the fed, based as we are in the two most significant financial centres. the partnership between our institutions, going back to benjamin strong and montagu norman, is more important than ever. we need to maintain a free flow of information and ideas. we owe that to the public we each serve, and we owe it to the rest of the central banking and macroprudential community. as those of us at the bank of england build the uk ’ s financial policy committee, we will need the active support of you all here and, in particular, of our colleagues from around the federal reserve system, for whom central banking began very nearly a century ago. see tucker, “ developing an eu cross - border crisis management framework ”, september 2010. bis central bankers ’ speeches | with growth close to trend - and with the imbalances within the economy beginning to adjust. in any event i am totally confident that mervyn king, my successor from july, with his deputies, andrew large and rachel lomax, and with the mpc, will be ready to adjust policy in either direction as the prospect changes, and that they will be as totally committed as i have been to maintaining stability and hitting the government's inflation target, as a necessary condition for sustainable growth. that will provide the best possible context for the continued development of your business, and the important contribution that you make to the economy. i, myself, of course, will be looking for a new lease of life in retirement! i'm not aware that it's a lease product any of you actually provide. given our ageing population perhaps you should develop one though you'd better be careful how you market it! in any event i wish you well. | 0 |
the us and also when concern about financial system stability heightened from the end of december last year to the end of march this year. since april this year, the economy has started to show positive signs, and liquidity demand in financial markets has gradually stabilized reflecting the abatement of concern about financial system stability. however, as mentioned earlier, the economic recovery is still in a nascent stage and there are also risks for the economic outlook. the bank should therefore continue strong monetary easing to support recent positive movements. as i mentioned earlier, it is extremely difficult to revitalize japan ’ s economy solely by monetary easing when it faces various structural problems. however, the bank ’ s strong monetary easing will continue to firmly underpin the recovery of the economy by stabilizing financial markets. furthermore, it is expected that the effects of the bank ’ s monetary easing measures will be fully felt when forwardlooking economic activity increases as structural reform progresses and efforts to strengthen the financial system bear fruit. iii. strengthening the financial intermediary function as japan ’ s economy is finally showing signs of recovery, whether the financial system can fulfill a growing need for funds in the course of the recovery is the key to ensuring a return to sustainable growth led by private demand. at the same time, it has been tackling the non - performing loan, or npl, problem, which is a negative legacy from the past. financial institutions should strive to promote the disposal of npls while reviewing unprofitable loans, a process which could be painful for many firms. however, there is basically no contradiction between fostering soundness of banking business and fortifying the financial intermediary function. i would like to outline three key tasks that need to be addressed in strengthening the financial intermediary function while improving financial system soundness. a. securing lending margins first, it is important for financial institutions to set lending rates in line with credit risk ( risk - based pricing ). at present, a large proportion of the loan assets of financial institutions are, in fact, unprofitable if default risk is taken into account. this is evidenced by the fact that npl disposals by financial institutions have exceeded their ‘ core ’ profits, in other words interest rate margins obtained from lending, in each of the eight years since 1994. the risk - based pricing of lending rates is to secure the lending margins of financial institutions. it is essential that financial institutions fortify their financial strength by striving to dispose | ( 3 ) those in medium - to long - term inflation expectations. 1. developments in consumer prices to begin with, let me talk about developments in consumer prices. the year - on - year rate of change in the cpi for all items less fresh food has been about 0 percent recently. however, in the case where crude oil prices decline by about 50 percent in a short period, as they did for some months starting from last summer, the cpi excluding fresh food and energy ( hereafter, the cpi excluding energy ) becomes a more important indicator in assessing the underlying trend in inflation. to verify this point, i would like to break down the year - on - year rate of change in the cpi for all items less fresh food ( hereafter, the cpi including energy ) into two components : the contribution of energy items and the contribution of the cpi excluding energy ( chart 7 ). bis central bankers ’ speeches until the introduction of qqe, the year - on - year rate of change in the cpi including energy had mostly been hovering within slightly negative territory, with a positive contribution of energy items being offset by a negative contribution of the cpi excluding energy. this means that, if price developments had been assessed on the basis of the cpi excluding energy instead of the cpi including energy, they should have been judged as being deeper in deflation. by contrast, after the introduction of qqe, the negative contribution of the cpi excluding energy started to lessen. its contribution turned positive in early autumn 2013 and moved further into positive territory until around april 2014 when the consumption tax rate was raised. during the same period, with the positive contribution of energy items, the year - onyear rate of change in the cpi including energy – excluding the direct effects of the consumption tax hike – also continued to rise and reached 1. 5 percent in april 2014. in other words, annual cpi inflation had continued to rise steadily toward 2 percent from the introduction of qqe until around april 2014 when the consumption tax rate was raised. thereafter, until early 2015, partly due to the effects of the consumption tax hike, the positive contribution of the cpi excluding energy – and also excluding the direct effects of the consumption tax hike – shrank. moreover, since around the summer of 2014, a substantial decline in crude oil prices has become a factor that decreases the year - on - year rate of increase in the cpi. in light of these developments, the bank decided at the end of october 2014 to expand q | 0.5 |
individual institutions cannot be excluded but should not threaten system stability. increase in interest rate risks these assessments, which have so far been positive, are becoming slightly clouded because of higher interest rate risks. smaller banks in particular have seen a relatively strong increase in direct interest rate risks. a sharp rise in the interest rate level could affect the valuation of assets and liabilities of such banks to such an extent that their capital resources would in some cases be reduced considerably. while such losses could still be absorbed, we would, however, consider a further rise in interest rate risks as critical. graph 2 : interest rate risks by bank groups ( reduction in net present value as a percentage of equity following an interest rate shock of + 100 basis points ) source : snb conclusion : increased efficiency without higher risks the slight narrowing of interest rate margins supports the assumption of increasingly fierce competition in the mortgage market. from the viewpoint both of consumers and of economic efficiency, this would be a welcome development. however, in the banking business there is always a danger that fiercer competition might encourage excessive risk taking by the banks. a bank can outperform its competitors by offering more favourable conditions while at the same time accepting poorer risk cover. however, as already mentioned, our aggregated analysis suggests that caution has not waned. banks ’ gross margins are declining slightly because their cost savings and improvements in efficiency are being passed on to customers. the capacity to absorb risks is not compromised by granting customers better conditions. currently, the positive aspects of healthy competition are taking hold without apparently having any negative side effects. the snb will nevertheless keep a close watch on trends in the real estate market. in particular, we will monitor interest rate risks, which have already reached a high level. with an appropriate normalisation of money market rates, the snb contributes to limiting the danger of an abrupt rise in interest rates. in the current environment of historically low rates, however, there is no guarantee that the future trend in interest rates will be moderate. sharp fluctuations in market rates are a possibility. this is a fact banks must bear in mind when managing interest rate risks. | partner no sign of banks taking greater risks since the end of 2002, mortgage claims have recorded annual growth rates of up to 6 %. this is quite substantial compared with the rather moderate trend in real estate prices. it appears that the expansion of mortgage claims has not been driven so much by real estate prices, but by the number of loan requests. consequently, the growing demand for loans is more likely attributable to factors other than the expectation of a speculative boom in real estate prices. the crucial question is the following : is the higher demand for loans due to excessively harsh competition among banks that has led to cheaper credit not reflecting the actual risks incurred? how has the relatively strong growth in mortgage loans impacted on bank risks? to answer this question, we took a closer look at the banks ’ risk behaviour. several indicators led us to believe that banks have hardly engaged in excessive risk taking. while it is true that interest rate margins, i. e. the spreads between mortgage rates and the banks ’ financing costs, had fallen slightly by mid - 2005, other bank expenses declined at the same time. in the final analysis, therefore, the profit margin was virtually constant or even slightly higher. the profit margin corresponds to the difference between the interest rate margin and the total operating expenses expressed in percent of the loan volume and – to reflect expected risks – of total value adjustments and provisions. the banks ’ profit margin thus also serves to cover unexpected risks. given that the profit margin has remained constant or moved slightly higher, the banks ’ risk - taking capacity has not diminished in spite of pressure on interest rate margins. this presupposes, however, that the banks have made realistic value adjustments and provisions. we currently assume that this is the case. moreover, average lending limits for mortgage loans have changed only insignificantly and may be regarded as cautious. for instance, the proportion of low - risk first mortgages – i. e. those mortgages with the lowest lending limit – is over 90 %. the criteria used in extending loans can also be rated as conservative. as a rule, assessments of a debtor ’ s future solvency are based on considerably higher interest rates than the current ones. mortgage debtors should therefore be able to meet their liabilities even if there is a marked increase in the interest rate level. our analysis focuses on system - relevant banks and on different groups of banks. we rely on aggregated data and on a random sampling of banks or groups of banks. problems with | 1 |
time of the turmoil ’ s outbreak ( and still is ) underestimated banks ’ exposures by not capturing the bulk of the risks related to off - balance - sheet vehicles as well as liquidity and reputational risks. supervisors and regulators should also have paid more attention to the challenge of regulatory arbitrage. in fact, some financial innovation processes were triggered – among other considerations – in order to circumvent the existing regulation, particularly on capital requirements. this aspect is even more pressing in the current environment, with large and complex financial institutions operating across borders, under different national regulatory and supervisory regimes. as i will mention below, an improved and closer cooperation and information sharing among central banks, regulators and supervisors at both national and international levels seems, therefore, essential. to sum up, we have seen that the causes of the current crisis can be traced back to macroeconomic imbalances and, at the micro level, to incentive problems and that regulatory and supervisory deficiencies have also played a role. nonetheless, the crisis has once again shown the importance of system - wide externalities in propagating and exacerbating the crisis. problems of individual banks may have wide and serious implications for both the financial system itself and the economy as a whole. overall, banks must ultimately respond to losses on risky assets by raising new capital. new equity, however, may be difficult to be issued in sufficient amount in the short run. as a consequence, banks ’ first responses have been both asset “ fire sales ” and the scaling back of their lending activity. these two effects affect the banking system widely. widespread liquidation of assets in the current market conditions pushes prices down. through mark - to - market accounting, declining asset prices lead to unwarranted contagion to other banks with similar assets. those banks may be forced to adjust their positions by selling assets themselves, thus leading to further asset price declines. similarly, when deciding to cut lending, banks may not internalise the repercussions of their decisions on the real economy in terms of foregone profitable investment opportunities, output and employment. 2. policy responses let me now turn to the public policy responses to the crisis, with a special emphasis on the common elements of the responses of the major players in the global economy. liquidity policies central banks have established the first line of policy defence against the adverse dynamics set in motion by the financial crisis, particularly through the massive provision of liquidity. although the specific responses have varied | ##kel and macron have suggested? germany and france have put forward interesting ideas in this respect. if properly designed ( that is, if it complements sound national fiscal policies ), a common euro area budget could help to dampen the impact of large economic downturns and make the economy less dependent on the ecb ’ s monetary policy. but it cannot and should not be the only way to make the euro area stronger. what needs to happen first? first of all, we need responsible fiscal policies and economic reform in all member states. many euro area countries still don ’ t have the fiscal space to support their economies in the event of a crisis, and their economies are not well prepared to long term challenges. so in my view, reform at the national level is the first line of defence. second, we need to complete the banking union and the capital market union to strengthen our single market and better fund innovation and growth. a common fiscal capacity is a useful complement, but it only comes third. what is still missing from banking union is a shared deposit insurance scheme. but this is a controversial topic in germany. savers are afraid that germany could at some point end up being liable for the collapse of, say, an italian bank. what would you say to that? a european deposit guarantee scheme is not about paying for other countries. it does not mean permanent transfers and it does not mean new taxes. a european scheme would increase confidence in banks and help them to operate on a pan - european basis, supporting the single market and hence growth and jobs. at the same time, it is of course important to keep reducing risks in european banks, in particular when it comes to non - performing loans. savers need to be patient. the ecb has decided that it won ’ t raise interest rates before the summer of 2019. why can ’ t it happen sooner? the euro area economy is growing and unemployment has fallen significantly. price pressures are gradually picking up. but this doesn ’ t happen in one day. ample monetary stimulus will remain needed to support a sustained convergence of euro area inflation towards our aim of 2 / 3 bis central bankers'speeches below, but close to 2 %. in other words : monetary normalisation has started, but it is a gradual one. we expect interest rates to stay at the current level at least through the summer of 2019. but we have already started to reduce our net asset purchases and anticipate to end them after the end of december. | 0.5 |
agenda on climate change risk assessment and sustainable finance. we have also established a climate risk and sustainable finance forum which met for the first time in june. this forum will enable stakeholders to discuss the implications of climate change for the irish financial system and share best practices on embedding climate risk and sustainable finance considerations within firms. 2 / 5 bis - central bankers'speeches in november of last year, you will remember, we issued a letter to regulated firms setting out our clear supervisory expectations relating to climate, environment and esg issues. our supervisory expectations focus on five key areas including governance, risk management framework, scenario analysis, strategy and business model risk and disclosures. it was noted that our approach to climate risk and esg issues will evolve based on our supervisory experience, engagement with industry and international developments in this area. that continues to be the case as we seek to accelerate action in this space. looking ahead, this will include legislative implementation and supervision of the new requirements in this area – including the sfdr, taxonomy regulation and the amendments to ucits / aifmd for management companies. we will continue to evolve regulatory policy for the asset management sector as required in the years ahead. but in the here and now, the implementation of the sfdr requirements is a key area of focus and i would like to briefly walk you through our continuing work, specifically related to the asset management sector. we continue to scrutinise fund applications as part of our gatekeeper role, which since march 2021 must be compliant with the sfdr level 1 transparency requirements. an effective and efficient gatekeeper function is a key part of our supervisory strategy for the funds sector. it is interesting to us that investment funds classified as either article 8 or article 9 products under the sfdr remain a small but significant part of ireland's funds sector. the majority of funds have classified themselves as article 6 products. however, the proportion of article 8 and article 9 products is expected to grow over time given investor demand for investment products which are considered sustainable. indeed, this reflects our gatekeeper experience, where funds seeking authorisation at present are more likely to be structured as article 8 or article 9 products. from 1 january 2023, additional requirements under the eu sfdr level 2 disclosure obligations will apply. we consider these new obligations to be instrumental in terms of the level of information that investors will now have about the products in which they invest. as you know, these new requirements will require irish investment funds to make extensive updates | in payments, so that money continues to serve europeans well ”. money, in whatever form it takes, serves as ; a unit of account providing a common measure of the value of goods and services ; a store of value which people use to transfer purchasing power from the present to the future ; and, most importantly in terms of our focus here today, as a medium of exchange ( or means of payment ) to facilitate trade and transactions. payment systems cover a wide range of transactions at all levels of the nancial system. retail payments systems apply to consumer and business instruments such as credit transfers, direct debits, credit or debit cards, cash and cheques. while wholesale systems handle the clearing level of nancial institutions such as interbank clearing or card payment schemes, up to settlement in central bank money. in terms of retail payments in ireland, ecb survey data from 2019 illustrates that 57 per cent of payments ( in terms of value, made either person to person or at point of sale ) were made by cash, while card payments accounted for a third. 3 the average person in ireland makes almost two such payments a day ( 1. 90 ) with an average value per payment of just over €30. 4 and i ’ ll come back shortly to how this has evolved with the pandemic. money and payment systems are at the core of the monetary system. the monetary system is founded on trust, trust placed by consumers, businesses and industry in the public good of money, the institutions that provide it and the payment systems that deliver it. maintaining trust in the monetary system is a rst - order public interest. 5 it is important to bear this in mind as we look to the evolution of payments into the future. the evolving landscape of payments over the last number of years, two key trends have been shaping the payments landscape ; speed and innovation. as our worlds have become increasingly digitalised, the expectation of speed, of instant delivery and removal of cross border frictions to payments has grown ever stronger. in response, there has been remarkable innovation in service offerings by rms, new and old, and indeed the pandemic served to accelerate the use of digital payments. [ refer to slide : use of electronic payment instruments in the euro area ] against this backdrop we have seen the emergence of new technologies and processes to meet this demand, both from existing providers and an explosion of new rms – ntech, big tech and start - ups. the e - money and payment services directive | 0.5 |
non - performing loans ( npls ) to gross loans fell from 17 % in cy03 to 7. 7 % by september 2007 and net npls from 7 % to 2. 3 % over this period. concurrently, provisions to npls ratio improved from 64 % to 72 %. bank ’ s capacity to absorb losses has grown as net npls to capital ratio declined from over 150. 5 % in cy01 to merely 11. 4 % in september 2007. furthermore growth and sector diversification of loan portfolio has helped to reduce the risk of overexposure. ( iv ) market risk has different dimensions as banks are engaged in a variety of businesses that expose them to interest rate, foreign exchange and equity market risks etc. the principal market risk facing banks is interest rate risk. the duration of assets and liabilities offers an accurate indicator of interest rate risk. with banks primarily raising short term deposits and lending for longer maturity the asset - liability mismatches are significant, though banks are being encouraged to raise long tenor deposits through exemption of cash reserve requirements. ( v ) liquidity risk : liquidity management is a key banking function and it helps banks withstand shocks and losses. liquidity risk, as measured by liquid assets to total assets and other indicators, has remained stable over the last 5 years albeit a modest decline recently along with decline in liquid asset to deposit ratio while advance to deposit ratio rose modestly. 11. while these indicators allow us to gauge the soundness on selective basis, the financial soundness index ( fsi ) indicator offers a more holistic measure. fsi is calculated as an aggregate index assigning 0. 25 weights to four key financial soundness indicators including capital adequacy, asset quality, profitability and liquidity. this index was negative for a number of years but since cy02 it has been positive and has consistently improved. 12. another major aspect of effective surveillance is checking the resilience of the banking system to various shocks through stress testing exercise. sbp performs stress testing through a set of exceptional, but plausible, assumptions using simple sensitivity analysis. the shocks cover different risk factors namely interest rate, forced sale value of collateral, npls, stock prices and foreign exchange rate in addition to liquidity, credit and market shocks. the stress testing exercise allows sbp to gauge the possible adverse impact on the banking system and provides basis for taking future regulatory measures. in principle, fortifying capital base has lent greater resilience to the | banking system against the adverse shocks. as of september 2007, capital of all banks can fairly absorb the impact of a shock of 10 % in increase in total npls. none of the groups would experience a fall in its car to below 8 %. in consumer finance category, however, a rise in npl - to - loan ratio to 10 % ( which is at 4. 4 % as of 30 sep 2007 ) of total consumer loans can have adverse impact on some banks. individually, four banks holding a share of 11 % in the assets of the banking system would experience a decline in their car to below 8 % under this sensitivity test. the impact of interest rate, exchange rate and equity price shocks can also be well absorbed by the healthy capital base of banks. iii. key policy drivers of financial stability 13. financial stability in pakistan has benefited from structural transformation of banking sector and wide ranging policy initiatives of the central bank. in particular, pakistan ’ s prudential regulatory regime has been crafted to promote and preserve financial sector stability. regulatory framework encourages ( i ) financial sector growth, diversification, and innovation ; ( ii ) healthy competition and risk taking to ensure a sustainable and aggressive income stream ; ( iii ) opportunities for enhancing the franchise value of banks ; ( iv ) prudent behavior and effective risk management to discourage infection of loan portfolio ; and ( v ) safeguarding social obligations and consumer interests. 14. promoting sound banking practices, sbp has implemented exhaustive guidelines for corporate governance and on risk management, business continuity plan, internal controls and stress testing. in 2007, sbp has been stringent in overseeing the management and board conduct and their conformity to fit and proper criterion. furthermore, two major sets of new regulations were introduced under which banks were required to induct independent board members and adopt umbrella risk management guidelines. a survey is currently underway to assess corporate governance practices of banks. 15. financial stability has been further fostered by the strengthening of banks ’ system - wide capital base to rs 372 billion. process of consolidation has been catalyzed by 30 odd mergers and acquisition ( both domestic and foreign - led ), moratorium on licensing of conventional banks and rise in minimum capital requirements for banks and dfis. to streamline capital with risks, banks have initiated implementation of the standardized approach, as prescribed under basel ii regulations. over the period, this is expected to augment the economies of scale and improve efficiency as competition and innovation grows. 16. | 1 |
##o markets have been under great strain. during the most intense periods of the crisis around the collapse of bear stearns in march 2008 and lehman brothers and others in the fall of last year, these markets seized up entirely : good collateral became unfinanceable overnight, firms failed, and risk aversion across all financial markets skyrocketed. this crisis of confidence was less acute in canada, but still produced severe strains in our wholesale funding markets. heightened uncertainty made counterparties reluctant to extend financing beyond the shortest maturities, resulting in intense funding pressures for canadian financial institutions. banks cut back their market - making activities in order to conserve balance sheet capacity, which further aggravated market volatility. these dynamics raised the risk of an adverse feedback loop between the financial system and the real economy. the bank of canada responded to these pressures by dramatically expanding our liquidity facilities, and the government of canada implemented a program to purchase insured mortgages with the help of the canada mortgage and housing corporation, thereby increasing the access of canadian institutions to longer - term financing. reflecting both the strength of our banks and the scale of our actions, conditions in canada have been consistently better than elsewhere ( chart 3 ). since december, these policies have gained considerable traction, helping to reinforce the improvement in domestic funding conditions as the global financial crisis subsided ( chart 4 ). this improvement has been reflected in a decline in the spreads on bank financing in money markets, a moderate extension of maturities, and a substantial reduction in the cost of term funding for canadian banks. in addition, policy initiatives have allowed banks to increase substantially their holdings of government securities, which has helped boost their liquidity situation in a capital - efficient way. these improvements have been further supported by strong growth in retail deposits and slowing credit growth ( chart 5 ). market - making activity in canadian financial markets has also been recovering, although it remains less than satisfactory. policy response there are important lessons to be drawn from this experience. the performance of core funding markets during the crisis intensified the financial panic and helped trigger the recession. this is totally unacceptable. as a consequence, one of the bank of canada's top priorities is to promote institutional changes to create more robust core funding markets. promising avenues to break such ( il ) liquidity spirals include introducing clearing houses, standardizing products, implementing through - the - cycle margining, and ensuring more effective netting. as the ultimate provider of liquidity to the system, the bank is thinking through whether | to adapt its facilities to support continuous private liquidity creation. bank capitalization since the crisis began, the capital adequacy of banks around the world has been the subject of intense scrutiny. concerns moved quickly from bank exposures to u. s. subprime debt on to structured products of all types as the crisis spread and, finally, to more traditional credits to businesses and households as the recession took hold. concerns about capital adequacy for banks outside canada were made worse by uncertainties caused by accounting standards, valuation methodologies, and a loss of credibility of the basel ii regulatory capital standard. it was not lost on investors that every single financial institution that failed had a capital ratio well above its basel ii regulatory minimum the day before it went down. as a consequence, investors have demanded ever - higher capital ratios from all banks, creating a dynamic that has exacerbated the recession. in this context, canadian institutions have benefited from several factors : high initial capitalization ( minimums set by the office of the superintendent of financial institutions are well above the basel threshold ), high - quality capital ( with one of the highest proportions of common equity ), the clarity provided by a simple leverage cap, low exposure to structured products, and clear valuation and disclosure standards ( including rapid implementation of the financial stability forum's enhanced disclosure guidance of april 2008 ) ( chart 6 ). writedowns by canadian banks have been relatively moderate to date, reflecting their conservative lending practices and low exposure to highly impaired asset - backed products. but canadian banks, as the principal source of finance in our economy, are still exposed to the risk of a marked deterioration in economic conditions, which would depress earnings and generate losses in their household and corporate loan portfolios. in general, this risk is why banks carry high capital buffers. the macroprudential risk is that these capital buffers may not be allowed to play their intended role in absorbing these losses because of market pressures to maintain inordinately high capital ratios. this could force banks to curb balance sheet growth, causing a tightening of credit conditions that would reinforce the negative impact of the economic downturn on the financial system. reflecting the generalized nature of the financial panic, as the crisis unfolded, canadian banks came under pressure from markets to increase their capital ratios. in response, canadian banks raised significant additional, high - quality capital from private sources. the recent improvement in market sentiment has been reinforced by the release in may of the stress - | 1 |
mall. by the way, my classmate, bobby claudio, will tell you about this - the power of the malls. when i talk to foreigners, they marvel at how many people are in our malls. you explain to them, the traffic is [ like ] this. [ they ask, ] " what is that [ volume ]? [ is it ] per year? " no, that is per month. the real problem is growth - sooner or later, unless met by rising exports - grinds to a halt because the current account deficit will get larger. so, the real question is : how do we attract manufacturing fdi [ foreign direct investment ]? by the way, it is not a problem in banking. the philippines is the primary source when it comes to global services. for 1 / 6 bis - central bankers'speeches instance, jpmorgan has 20, 000 employees here. if we can have the same success somewhere else [ in different sectors of the economy ] - mining has already been mentioned - then growth will continue. fortunately, we do not have to step on the brakes too soon because the central bank fx [ foreign exchange ] reserves are high. in other words, if we get a bad year or two, the central bank can actually sell some of its fx reserves. well, of course, if it keeps doing that, then the central bank fx reserves fall, confidence in the currency will fall, and we will have all sorts of problems that we have had historically. by the way, i started too soon. i should greet all my friends. [ pcci president ] george barcelon. we graduated the same year, but i did not have grade 7 and kinder. addressing the inflation question your [ pcci's ] press release is that " the government must act immediately to reduce inflation in the first quarter of 2023. " from what i see, a lot of important things are already happening. for instance, the importation of sugar took a long time, but it is now finally coming. by the way, in the case of sugar, all the protectionist policies have been embedded there for decades. so, it is not easy [ to reverse ]. of course, one can say that it is about time that we review [ our sugar importation policy ]. when you have to close bottling plants because of the shortage of sugar, what you have is a problem. the economy is growing rapidly. and if you say " do not import | , and harrison shieh. their paper analyzes macroeconomic data from advanced and emerging economies in the 1980s and 2020s to highlight differences in how u. s. monetary policies have impacted emerging markets in these two distinct periods. the second paper in this session, by francisco legaspe and liliana varela, will show how country - specific risks, such as political uncertainty and risk on debt repayment explain excess returns from investing in local currency assets in latam countries. finally, a policy panel featuring elias albagli, jean - marc natal, boris hofmann, and ricardo reis will offer insights into the future of interest rates and their implications for monetary policy in emerging economies. 5. acknowledgements i would like to especially thank atif mian for being the external organizer of this conference, as well as locals sofia bauducco, mariana garcia and lucciano villacorta for putting togethersuch a wonderful program. i also thank all the speakers and contributors and look forward to the conference volume that we will publish in some months with its formatted contents. let me finish by thanking maria jose reyes, constanza martinelli, carolina besa, daniela gaete, daphne guiloff, pablo barros, and both the public affairs department and the economic research department of the central bank of chile for all their invaluable help managing the logistics of organizing this annual conference. i wish you a fruitful discussion over the next two days. thank you. 5 / 5 bis - central bankers'speeches | 0 |
developed countries, it has often been shown that the countries that opened themselves up to competition, imports and exports have developed much better than the countries that tried import substitution, i. e. tried to build up industries for all their own needs. economic research indicates that this is the case. south korea, singapore and now china are examples of more or less open economies that are seeing much better growth now, while india had poor growth for a long time, as it closed its borders. other countries that have closed themselves in, such as nigeria, ukraine and pakistan, are suffering degrading poverty. countries that were previously more open with a high standard of living can sink into crises and misery, as is the case with argentina and uruguay. participating in international exchanges provides investment, access to new technology and spreads knowledge of business life and company management. when managed properly, poor countries that open themselves up to the outside world can achieve more rapid growth than the industrialised nations through what economists call " catching up ". sooner or later even the poorest are raised to a higher standard of living with a more even distribution within the country. one example of this type of development is parts of china, after the country began to turn outwards and liberalised its economy. some conclusions now back to lars goran's question : does globalisation have anything to do with the closing of the atm? yes and no. in a dynamic economy with rapid growth, the production of goods and services is constantly changing. there is cost cutting, restructuring, closures, innovations and new production starting up all the time. when an atm gives rise to more costs than it brings in income, it is closed down and bank services have to be handled in a different way, sometimes at higher costs to the customers, but always at lower costs to the bank. these are the conditions in a market economy. globalisation speeds up the process by increasing competitive pressure. the closing down of the atm may occur sooner than it would have otherwise. but the tougher competitive pressure provides us with other services, e. g. we can sit at our desks at home and pay our bills via the internet as well as making transfers between wages accounts and bank loans. and we can pay by card. the atm becomes less important. globalisation speeds up the process in the changes in production and consumption patterns in a competitive market economy. this probably cannot be avoided and if we are careful, it can be turned to our advantage, as has been demonstrated | daniel k tarullo : dodd - frank implementation testimony by mr daniel k tarullo, member of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington, dc, 11 july 2013. * * * chairman johnson, ranking member crapo, and other members of the committee, thank you for the opportunity to testify on the federal reserve ’ s activities in mitigating systemic risk and implementing the dodd - frank wall street reform and consumer protection act of 2010 ( dodd - frank act ). with the third anniversary of the dodd - frank act upon us, it is a good time to reflect on what has been accomplished, what still needs to be done, and how the work on the dodd - frank act fits with other regulatory reform projects. indeed, the deliberate pace and multi - pronged nature of the implementation of the act – occasioned as it is by complicated issues and decisionmaking processes – may be obscuring what will be far - reaching changes in the regulation of financial firms and markets. indeed, the federal reserve and other banking supervisors have already created a very different supervisory environment than what was prevalent just a few years ago. today, i will review recent progress in key areas of financial regulatory reform, with special – though not exclusive – attention to implementation of the dodd - frank act, including how that law affects the regulation of community banks. i will also highlight areas in which proposals are still outstanding and, in a few cases, in which we intend to make new proposals in the relatively near future. implementation of basel iii capital rules let me begin by noting the completion of our major rulemakings on capital regulation. although most of the provisions in these rules do not directly implement provisions of the dodd - frank act, implementation of that law is occurring against the backdrop of implementation of the basel iii framework. this month, the federal reserve, the office of the comptroller of the currency, and the federal deposit insurance corporation ( fdic ) approved final rules implementing the basel iii capital framework, as well as certain related changes required by the dodd - frank act. 1 the rules establish an integrated regulatory capital framework designed to ensure that u. s. banking organizations maintain strong capital positions, enabling them to absorb substantial losses on a going - concern basis and to continue lending to creditworthy households and businesses even during economic downturns. the rules increase the quantity and improve the quality of regulatory capital of the u. s | 0 |
christian noyer : first experiences with the euro speech by christian noyer, vice - president of the european central bank, delivered at the international center for monetary and banking studies, held in geneva, on 20 march 2001. * * * ladies and gentlemen, i am pleased and honoured to be able to speak to such a distinguished and varied audience today. i am sure you will appreciate in what an exciting and important time we are living. in slightly more than nine months, the euro banknotes and coins will be in the hands and pockets of all citizens of the participating member states. the euro will thus become tangible in the personal dealings of 300 million europeans and cease to exist only on computer screens or in the press headlines. travelling from the sunny islands of the mediterranean to the icy lakes of scandinavia will no longer require any stop at a bureau de change. this is no little achievement, to my mind. while the introduction of euro banknotes and coins will certainly bring about a quantum leap in people's acceptance of the euro and change their psychological attitude towards it, we should not forget that a great deal has already been done and that monetary union is already fully - fledged reality. i am by no means an impartial observer, but i think that the first two years of monetary union have been a success. i hope to have convinced you of that by the end of my talk. the euro - the crowning achievement of the single market programme - has de facto created a common market of 300 million consumers, one of the two most important economies in the world. this reinforces the possibilities for producers to exploit the economies of scale that - at least since the work of adam smith - are regarded as one of the main engines driving economic growth and technological progress. competition is being fostered and will be fostered even more in the future by the increased price transparency that the introduction of euro banknotes and coins will bring about. during the first two years of economic and monetary union ( emu ) in europe, we have dealt with the difficult task of consolidating a new central bank, the european central bank ( ecb ). this has been by no means easy, also because the ecb plays a role of global importance and is continuously in the limelight of public attention. in my view, the ecb has proved to be very well equipped to tackle the challenges it is confronted with in a successful manner. an important contribution to this is to be attributed to the drafters of the | jean - claude trichet : growth performance, labour productivity and structural reforms in the euro area speech by mr jean - claude trichet, president of the european central bank, before the student forum at the university of hohenheim, stuttgart, 20 january 2006. * * * ladies and gentlemen, i am grateful to the organisers of this event [ global panel ] for inviting me here today and allowing me to share with you my views on some important issues for the euro area economy. the topic of my speech – the long - term growth performance of the euro area – is an issue that is of major importance for our continent for it commands not only its prosperity but also its relative influence in a global economy which is experiencing major structural changes. in my talk today i will explain what the main driving forces behind growth are, and in particular the role played by productivity growth. allow me to suggest that while the role of ‘ genius ’ in enhancing productivity is undeniable, as gottlieb daimler and robert bosch demonstrated so well in this city, we should not be complacent and wait for it to happen. maybe it is appropriate in this context to recall the words of another great inventor, thomas alva edison : “ genius is 1 % inspiration and 99 % perspiration ”. from my perspective, not being complacent means remembering that sound macroeconomic policies, pro - competition product market regulations and well - functioning labour markets provide a favourable environment for productivity growth. i will structure my remarks as follows. first, i will present an assessment of the growth performance of the euro area. second, i will focus on productivity developments in the euro area since the mid - 1990s. third, i will explain the role of economic policies in promoting productivity growth. finally, i will conclude by explaining where, in my opinion, responsibilities for fostering growth and prosperity in the euro area lie. growth performance of the euro area there is evidence of increasing disparities in growth between developed countries. before the 1990s there was a catching - up process, with the lower gdp per capita economies growing faster than the richer economies, but this pattern is less clear in more recent data. let ’ s compare growth in the us and the euro area. from 1960 up until the late 1970s average real output per capita growth was higher in the countries that now make up the euro area ; in the 1980s it was roughly the same, but by the mid - 1990s it was lower. actually, euro | 0.5 |
masaaki shirakawa : recent economic and financial developments and the conduct of monetary policy speech by mr masaaki shirakawa, governor of the bank of japan, at a meeting with business leaders, osaka, 31 august 2009. * * * introduction i am honored to be here today to speak and to exchange views with business leaders from the kansai region. i take this opportunity to express my deep gratitude for your cooperation with the bank of japan's branches in osaka, kobe, and kyoto. before we exchange views, i will first speak about the background to the recent economic recovery and the economic outlook, as well as the bank's thinking behind the conduct of monetary policy. at the gathering held at the end of august last year in osaka, i mentioned two things about japan's economic outlook. one thing was that growth would likely remain sluggish for the time being. and the other was that, even so, there was a remote possibility that japan's economy would experience a crucial adjustment phase. i presented a cautious outlook that growth would likely remain sluggish for the time being because i judged that the accelerated rise in energy and materials prices at the time as well as the effects of the bursting of a global credit bubble triggered by the subprime mortgage problem would continue to weigh on the economy at home and abroad in the form of balance sheet adjustments. while i believe that the judgment itself was a valid one, as for the part that there was a remote possibility that japan's economy would experience a crucial adjustment phase, it turned out that the possibility became a reality and the economy followed a bumpier road than envisaged at the time. needless to say, the direct cause was the collapse of lehman brothers in september last year. because of that, a liquidity crisis emerged on a global basis, and we faced a serious situation that confidence, which could be said as a prerequisite for the normal functioning of financial markets, collapsed. as a result, the economic conditions deteriorated simultaneously and sharply worldwide, the situation no policy authorities around the globe ever imagined. in fact, looking back on the changes in the international monetary fund's forecast for world economic growth for 2009, it was plus 3. 9 percent in july last year, but was subsequently revised downward for several times to become minus 1. 4 percent in july this year. the sheer fact that the forecast for the growth rate was revised downward by more than 5 percentage points in a period of | the issue of raising productivity are of course people of the private firms. for such efforts, the bank is and will be of service through creating a stable economic and financial environment. thank you. | 1 |
. for this vision to become a reality, a key enabler is that retail payment infrastructures become interoperable and consolidate. the outcome of theses changes on retail payment systems is uncertain. it may lead to various structures, ranging from a natural monopoly exercised by one infrastructure that would encompass most national and cross - border payment flows, to the competition between several systems. however, whatever the structure, the challenge will be to find the right balance between two objectives : reaping economies of scale and scope and ( 2 ) fostering competitive market conditions and behaviours. 1. 2. keeping pace with technological progress the second issue for payment infrastructures consists in keeping pace with technological progress. payment systems are made up of it networks, hardware and software. as a consequence, technological progress is a key driver for enhancing the way payment systems are designed, operated and used. i will highlight a few significant examples of recent technological developments. the first half of the nineties experienced a major transformation in the design of large - value payment systems with the widespread introduction of real - time gross settlement ( rtgs ) systems. in a second step, further advances in information technologies have made possible new designs like the so called “ hybrid systems ”, i. e. systems that settle in real - time but, at the same time, minimise liquidity needs thanks to highly sophisticated optimisation mechanisms. in short, advances in information technology allowed large - value payment systems to settle faster, with a lower amount of liquidity and at a lower cost. on the retail payments side, technological progress should also allow safety and efficiency gains beyond those which have resulted, for instance, from the implementation of cheque truncation or those that are expected from introduction of the emv ( europay mastercard visa ) technology for card payments. innovation has definitely an important role to play in order to keep the sepa project futureoriented and promote the use of new delivery channels for retail payments like the internet and mobile devices, or new types of services like electronic invoicing. however, this flow of innovations come together with the entry in the payments market of new actors which do not always offer the same level of security as the traditional suppliers of those services, namely credit institutions. there is obviously a trade - off between, on the one hand, encouraging innovation by facilitating access to the payments market and, on the other hand, ensuring the safety of payments provided by setting prudential requirements on their suppliers. this challenge | encompassing a spectrum of policy choices, which inter alia, include : the appropriate level of reserves ; monetary policy objectives related to liquidity management and interest rates and maintenance of healthy financial market conditions with financial stability. " [ para 3. 1 ( page 56 ) ] the eleventh five - year plan ( 2007 - 2012 ) as approved by the national development council on december 19, 2007 makes several observations in this regard. some of these are reproduced here. " the problem posed by having to manage large inflows has been discussed in chapter - 10. it arises because of the well known " trilemma " that it is not possible to achieve three objectives simultaneously, i. e. free capital mobility, an independent monetary policy and a stable exchange rate. attention should be given to measures to restrain these capital flows and enhanced the absorptive capacity in the economy to avoid running into the classical " dutch disease " situation where non - tradeables become overpriced and erode the competitiveness of the economy in the tradeable sector. " ( para 2. 30 ) " the cautious approach to opening the capital account followed thus far as a conscious act of policy has given the government some leeway in limiting inflows of certain categories. " ( para 2. 33 ) " these problems illustrate the merit of the cautious approach adopted by the government in the matter of liberating capital inflows. the advantages of accessing pool of capital to finance development are recognised in the commitment to move gradually to fuller capital account convertibility. but the move is to be made gradually at a pace which enables the authorities to deal with unexpected volatility. in controlling capital flows it is important to recognise the relative attractiveness of different types of flows. in this regard direct foreign investment is the most preferred form of flow. investments in indian firms through the stock market and by venture capital funds in unlisted companies are also potentially beneficial. external commercial borrowing and other short term flows are areas where one can introduce an element of control to moderate sudden surges. however, even with capital calibration it is not easy to manage a surging capital inflows, if it occurs. in such situations, it is necessary to explore ways of limiting the fiscal cost of sterilising large growth of reserves : either by making these flows less attractive or by means that do not require costly sterilisation. " ( para 13. 72 ) it is noteworthy that there is recognition of the more immediate challenges | 0 |
economic growth. the thai economy this year will continue to be driven largely by domestic demand and tourism. exports will likely remain flat or decline further, not only due to subdued global demand but also price effects as export prices have tumbled following the low commodity prices. but, so far the impact on the labor market, even those in export - oriented sectors, has appeared well - contained. notwithstanding the threatening uncertainty around us, tourism continued to be a main growth driver for the thai economy, with expected tourist arrivals of around 31 millions in 2016. the clmv market is another bright spot. the thai exports to clmv market are expanding in accordance with their growing middle class and vibrant economic activities. the clmv market is now accounting for 10. 4 percent of thai total exports, which is already larger than our exports to japan, the third largest export destination. in terms of the domestic economy, we have learned from the latest gdp release that the construction sector has picked up with a strong growth of more than 20 percent in the fourth quarter of last year, thanks to government infrastructure projects. the spillovers from these projects are also benefiting the real estate market. demand for properties continues to expand as we see mortgage loans growing at around 10 percent year on year in recent months. financing conditions have also been favorable. monetary policy stance remains accommodative and in full support of economic recovery. and, despite the slow economic growth, the overall credit and corporate bond issuance to the private sector continues to grow at around 7 percent. the bank of thailand would ensure that the cost of funds is conducive to the ongoing recovery, while also keeping a cautious eye on risks to financial stability. on the fiscal front, the government has become more effective in disbursing and implementing investment projects. government relief and stimulus measures are also essential at difficult times, especially for those severely affected by adverse economic situations, such as from the current drought. but while taking care of the short - term issues, we must not forget to reckon longer term challenges facing the thai economy. thailand is in need of serious initiatives to upgrade and unlock our economic potential in the long term. in this context, we welcome many new initiatives by the government to push ahead with structural reforms. this brings me to the last part of my talk tonight on the way forward for the thai economy, and how we and our partners like japanese businesses may ride together toward sustainable prosperity. let me first touch upon some of the ongoing reforms | final rules. in any event, i recommend that french insurers continue with their preparations in order to be ready technically in 2014 as if the standards were going to enter into force as scheduled. is the programme of job cuts that you have just announced for the banque de france sufficient when compared with staff levels at other central banks? i find the accusations about the supposedly excessive staff levels at the banque de france exasperating. they are based on spurious international comparisons since other central banks – such as the bank of england – do not print their own banknotes, do not ( yet ) incorporate the banking supervisor and do not perform tasks such as the management of bis central bankers ’ speeches over indebtedness, which is entrusted to the banque de france by law. more than 200, 000 households debt applications processed every year is no mean feat! we have already made a great effort over the past few years as our staff levels have been cut by nearly 20 % in ten years. and we will continue with this effect ; but it is based on a detailed analysis of our activities and requires substantial investment in order to increase productivity. our programme is ambitious but in keeping with the reality of the tasks we perform and respectful of our employees. bis central bankers ’ speeches | 0 |
was hard for the public to tell whether a change in the calendar date reflected a shift in policy or a change in the committee ’ s economic forecast. to help provide greater clarity about the committee ’ s objectives, in january 2012, the fomc adopted and released a statement of its longer - run goals and monetary policy strategy. 10 this statement laid out, for the first time, the rates of inflation and unemployment that the fomc considers consistent with the dual mandate. specifically, it stated that the longer - run inflation goal most consistent with the fomc ’ s price stability mandate is 2 percent, and that the central tendency of fomc participants ’ estimates of the longer - run normal rate of unemployment ranged from 5. 2 to 6 percent. as the statement also made clear, economic developments may cause inflation and unemployment to temporarily move away from the objectives, and the committee will use a balanced approach to return both, over time, to the longer - run goals. on the one hand, for example, the current rate of unemployment, at 7. 7 percent, is far above the 5. 2 to 6 percent range in the statement and is expected to decline only gradually. inflation, on the other hand, has been running at or below 2 percent and is expected to remain at similar levels for several years. in this circumstance, both legs of the dual mandate call for a highly accommodative monetary policy. with unemployment so far from its longer - run normal level, i believe progress on reducing unemployment should take center stage for the fomc, even if maintaining that progress might result in inflation slightly and temporarily exceeding 2 percent. the committee reaffirmed this statement in january 2013, and i expect it to remain a valuable roadmap for many years to come, indicating how monetary policy will respond to changes in economic conditions. 11 meanwhile, the fomc has continued to enhance its communication about how it would use the federal funds rate to return inflation and unemployment to its longer - run objectives. last december, the committee replaced its calendar guidance for the federal funds rate with quantitative measures of economic conditions that would warrant continuing that rate at its current very low level. specifically, the committee said it anticipates that exceptionally low levels for the federal funds rate will be appropriate “ at least as long as the unemployment rate remains above 6 – 1 / 2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the committee ’ | for a smooth cross - border resolution process, we cannot always be certain of the circumstances under which host authorities may choose to take or be required to take actions such as unilateral “ ring - fencing ” that might disrupt the implementation of the single point of entry approach. thus, we need to continue to work with foreign regulators to iron out any issues ahead of time so that the resolution regime will work well for global, systemically important firms. the smooth operation of a resolution proceeding also depends on the existence of adequate liquidity in the early days of the process. one of the key pillars of title ii is that, unlike a bankruptcy proceeding, the fdic will have access to liquidity from the u. s. treasury to help ensure an effective resolution. while this access provides significant support for an effective resolution, it will still be important for the resolution authorities to provide clarity about the timing and the amount of liquidity resources that will be made available after a firm enters into resolution. this clarity will likely be necessary in order to calm creditors and markets at the time of resolution. under the single point of entry framework, the intent is to create a highly capitalized bridge entity so that counterparties will be willing to stay engaged based upon the improved creditworthiness of the bridge parent and its recapitalized subsidiaries. if successful, this will reduce the need for the up - front provision of external liquidity resources. nevertheless, to make the viability of the bridge entity fully credible, market participants must believe that the bridge company has access in a timely way to whatever additional liquidity resources might prove necessary. in addition, under the dodd - frank act, title ii is not the baseline or preferred approach for dealing with the failure of a large complex firm. for a firm to go through title ii, a determination must first be made that the failure of the firm and its resolution would have serious adverse effects on u. s. financial stability under the insolvency law that would otherwise apply. because market participants will not know for certain which path u. s. authorities will ultimately take – allowing resolution under ordinary insolvency law, as contemplated under title i, or instead initiating a title ii resolution – this uncertainty in and of itself could cause investors in short - term obligations that are likely to be protected under title ii to run. several other issues are also worthy of note. first, for the title ii single point of entry strategy to work properly, there needs to be a sufficient | 0 |
evaluate clearly how the government is doing in relation to a long - term norm. the idea of being on or off target is quite easy to grasp, and if the process is transparent, experts and the public alike will learn to trust the figures. in this area most countries still have a lot to do. it is a pity that government accounts, which affect everyone in a compulsory way, are less transparent, less well audited and less understood as the accounts of companies listed on the stock exchange, which only affect very few people and at their own risk. sweden has a target of a 2 per cent surplus for the public sector over the business cycle, a figure that includes pension savings and that, given an ageing population, is in fact akin to targeting a balanced budget over the cycle. this target is present in the debate of every budget. the national institute of economic research comments on the target and helps the public to understand it. this keeps the government accountable not only in the normal political sense but also in relation to the targets agreed upon. the political debate is in a sense being taught to keep the long term in view. the public then knows from the national debate that fiscal discipline is good for the country and if “ accountants ” or other nations in brussels criticise your budget policies, there is a greater chance of the criticism being interpreted as a help towards fiscal soundness. the swedish trade unions, for example, are among the most vocal defenders of our budget target. however, the framework might still not be strong enough - the 2 per cent over - the - cycle target has been slipping somewhat out of view given that the government, as i mentioned, is focusing more on the short term recently. sweden would perhaps need an even more formal external fiscal evaluation. this leads to an important conclusion for the pact. perhaps the solution to regain credibility is neither to water down the pact, nor to impose even stricter rules centrally. the solution is perhaps to build from below - to complement the european level with national frameworks in the respective european nations so that they come to internalise the need to balance their budget over the cycle and to ensure that the same transparency exists on the fiscal side as on the monetary side. while pressure from fellow finance ministers has apparently not worked well enough, the present attempts at national processes with transparent targets have a better track record. why not have all eu countries commit themselves to establishing independent bodies with the responsibility of enhancing transparency by conducting independent forecasts of the countries ’ deficits | therefore by definition meet with less of a monetary policy response than it would if monetary policy had been national. furthermore the nature of the political set - up makes it more difficult for the ecb to comment on individual national budgets. this means there will be a strong temptation to “ free ride ” by expanding the budget at the expense of fellow european nations. but the dilemma goes further - given that it is rational for others to expand their budgets it becomes rational for your own country to do so too - even if your instinct is not to “ free ride ”. otherwise you might rationally expect to end up among the small minority that does not expand and at the same time still have the tighter monetary policy that results from everyone else expanding. this is the classic “ prisoner ’ s dilemma ” from game theory. the conclusion is that it is necessary to have rules for fiscal policy that limit deficits and debt when monetary policy is united and fiscal policy divided, and that these rules need to be followed. but the conclusion is also that the pressure to over - expand is as strong during an upturn as during a downturn. in fact this is what we have seen in the euro zone during the heyday of the late 1990s - a much too expansionary fiscal stance in some euro zone countries, which led to tighter monetary policy and thus an incentive for others to weaken fiscal discipline. the euro zone then started the downturn with large deficits, considering the earlier boom, instead of surpluses. what the pact then required, a 180 - degree turnaround in fiscal policy to a tighter stance, reinforcing the downturn, was considered by some as stupid. in fact it was the lack of savings during the boom that was stupid. thus, we would need rules not only like the stability pact, for a maximum deficit in a downturn, but equally some forceful rule for fiscal rectitude in good times. those rules are difficult to state as clearly as the 3 per cent limit, but one way ahead could be to define annual targets for actual net lending based on the predicted output gap. but why didn ’ t we see these problems from the beginning? perhaps because we were fortunate to have something that can work as a temporary replacement for rules : clear objectives, strong leadership and the market as a quickly reacting judge. this existed not so long ago in europe. the objective was to join the euro zone and achieve the convergence criteria. the leadership was provided by germany both in terms of its economic size | 1 |
have come about through the lessons from our own past. the bsp together with the banking industry will remain steadfast in our reform effort. if we are to serve our public, we must continue to be responsive to their needs and to ensure that we act responsibly, mindful of the trust bequeathed by our public on us. the term “ fiduciary responsibility ” is not just a mantra that is conveniently brought out as the need arises but it is instead a social contract with our most basic constituent. this is the way forward and this is the high bar that must be set if we are to see responsive and responsible banking bear fruit. i have seen our market rise with resiliency when it was down. i have every bit of confidence to know that it will find the answer to the difficult questions when our present position is that of relative strength. it is after all, all about who we are who we serve, and, now is the time to show what we are made of. thank you very much and good morning. | ##scores the enormity of the remaining clean - up task ahead. the incentives under the spv law expire on april 8, 2005. there isn ’ t much time left. there is a possibility of an extension on the basis of strong representations being made by the banking industry. as a practical matter, the bsp will not object to an extension, but candidly speaking, we will have serious concerns over an overly long extension that will only likely weaken the resolve to face the music. another year should be reasonable. if this results in another p100 billion in transactions, then we can see the npl ratio going down further to around 7. 5 percent in 2005. whatever extension is given by congress, all our banks that still carry large npas in their portfolio are well advised to bite the bullet soonest and clean up their balance sheets. don ’ t do it because the bsp says so. do it because it is primarily in your interest to do so. going forward, that burden can only become heavier especially as regulations evolve to force fair valuation of all financial assets in the context of migration to ias in reckoning accounts. the implementation of basle ii will also lead to heavier risk weighting on npas. in general, the prudential standards on the banking system will continue to keep rising as we seek closer alignment with international standards. we have already announced that banks should be ias compliant by end - 2005. we really have no choice on this. our ratings cannot afford it. we have likewise defined the roadmap to make the banking system compliant with basle ii by 2007. given the complexity and deep impact of these changes, it is necessary to begin preparations right away. the ultimate success of the banking reform agenda depends to a very large extent on congressional action to amend the bsp charter primarily to strengthen the institutional arrangements for banking supervision. this especially pertains to providing better legal protection to bsp personnel in the course of the performance of their official duties. other countries protect their regulators which make them more effective. hopefully, the necessary legislation will be finally delivered this year. we are also keenly advocating the enactment of a law that will enable us to establish a strong credit information bureau that will anchor a comprehensive credit information system. the benefits of this are enormous in providing wider credit access especially to small borrowers, in lowering the cost of borrowing of responsible borrowers, and in reducing the credit risk exposure of the banking system. you are also | 0.5 |
; capital rose by 0. 1 %, to rsd 68. 5 bn ; technical provisions gained 5. 7 %, coming at rsd 234. 3 bn. slide 4 : the current risks heightened the awareness about the importance of insurance it can generally be observed that the pandemic additionally heightened health concerns and awareness, bringing to the fore the importance of investment into financial security and the need for adequate asset coverage. the greatest absolute increase in the insurance premium was recorded for : 2 / 6 bis - central bankers'speeches property insurance, voluntary health insurance, motor third party liability insurance, full coverage motor vehicle insurance – " kasko ", and travel assistance insurance, which reflected the greatest impact of the pandemic in the year of the pandemic outbreak. slide 5 : nbs as the supervisor and regulator of the insurance market – activities in the service of citizens and corporates as for the responses of the national bank of serbia, as the supervisor and regulator of the insurance sector, in this challenging year of global uncertainty and crises we continued to take regulatory measures, some of which were part of joint efforts of all economic policy makers aimed at preserving the stability and living standard of citizens in the existing circumstances, that are in no way simple. if everyone carefully calibrates their decisions within the bounds of their authority, it will be easier to weather the global crises and their negative effects! for example, in may this year we adopted the decision on application of the sex factor in insurance which implements the provisions of the law on gender equality. i wish to particularly underline the cooperation with the insurers'association in the adoption of this regulation, which attracted considerable public attention. the decision introduced the greatest changes in undertakings'operations related to life insurance by equalizing insurance premium between men and women. in other words, insurance undertakings can no longer use the sex factor in pricing which entails differences in individual premiums and benefits. further, by amending the decision on reporting by insurance / reinsurance undertakings we prescribed the obligation for undertakings to timely submit information to the national bank of serbia about profit distribution and planned dates of dividend payment to shareholders. these amendments were adopted so that we could take timely action in our supervisory capacity to preserve the stability of an undertaking's financial position when that is assessed to be in the best interest of the insured persons. in august we also adopted the decision amending the decision on the system of governance in insurance / reinsurance undertaking, | ##rial rules, as well as good business practices and business ethics. we were guided by the understanding that the insurance service must serve its main purpose, i. e. be the protection from various types of risks and a considerable assistance in difficult life and business circumstances. at the same time, 1 / 6 bis - central bankers'speeches our measures ensured stable and predictable business conditions for all financial market participants, including the insurance sector. slide 2 : figures confirm a decade of stable growth of the insurance industry as a result, and despite the numerous challenges we faced, we may call the period behind us a decade of stable growth. the data show that all key performance indicators of insurance industry progressed on an upward path during the ten years, which is a relevant period for analysing trends and drawing conclusions. concretely, the amounts of capital, total assets, technical provisions and life insurance premium more than doubled, which also impacted the positive trend of premium per capita ( from eur 75 to eur 149 ) and insurance premium to gdp ratio ( from 1. 6 % to 1. 9 % ). total insurance premium rose from rsd 61. 5 bn in 2012 to rsd 119. 4 bn in 2021 and life insurance premium from rsd 11. 9 bn to rsd 27. 1 bn. the amount of settled damage claims also increased twofold – from rsd 27 bn to rsd 56. 8 bn. slide 3 : stability of the insurance market was preserved even amid the pronounced global uncertainty what gives special importance to this result is the fact that even in conditions of additionally constrained business activities, aggravated by the global uncertainty in 2022, the stability of the insurance sector was preserved. the first three quarters of this year saw a positive interim net result of rsd 5. 8 bn, with the capital adequacy ratio by far exceeding the regulatory requirement. insurance and reinsurance undertakings preserved the value of the investment portfolio and ensured technical provisions sufficient to meet the liabilities under the concluded insurance contracts. the total insurance premium in the first three quarters of 2022 went up by 12. 2 % y - o - y, a growth rate much higher than the average rate achieved during the same period in the past ten years ( 6. 9 % ). also, comparing the first three quarters of 2022 with the same period of 2021, the following indicator changes can be observed : balance sheet total of the insurance sector increased by 2. 7 %, to rsd 343. 2 bn | 1 |
to the rescue the cesee countries deployed rather large fiscal packages, including i. a. tax cuts, wage subsidies and short - time working schemes. at their maximum usage, such schemes covered, for example, page 2 von 8 up to 15 % of the workforce in slovenia and slovakia, up to 20 % in romania and about one - third in croatia. of course, the size of fiscal packages varied according to the fiscal space available. monetary policy reacted as well. in several countries quantitative easing via outright government bond purchases emerged as an important pillar of monetary policy. moreover, macroprudential measures were adopted that cushioned the impact of the crisis on both banks and borrowers. the cesee countries also introduced moratoria which played an important role in administering – metaphorically speaking – first aid. since the moratoria only provided temporary relief, they have since been extended and better targeted. however, it was not only domestic policies that came to the rescue, but also international cooperation and liquidity support which were negotiated in a timely manner by international financial institutions, such as the imf and the ebrd, as well as with the ecb. regarding the latter, let me draw your attention to the liquidity arrangements between the ecb and the cesee countries, including bilateral swap and repo lines and the newly established precautionary backstop facility eurep. as a case in point, the ecb agreed on new swap lines with bulgaria and croatia in spring and early summer, and on new repo lines with albania, hungary, north macedonia, romania and serbia. this support helped stabilize international capital flows for these countries. the global nature of the crisis impacts on cesee via gvcs and policy spillovers after this brief review of the most recent economic developments in the cesee region, let me come back to the second distinguishing feature of the current crisis – its global nature. this brings me directly to this year ’ s ceei which addresses the topic of “ cesee in the covid - 19 crisis – the role of the eu and global spillovers. ” in this context, i would like to focus on three issues : i ) the role of global value chains ( gvcs ) ; ii ) the role of monetary policy spillovers ; and iii ) the role of eu funds. 1. the role of gvcs first, the cesee countries are among the countries with the highest degree of economic integration through trade, foreign direct investment ( | expects a downturn similar to that forecast by the imf for 2020, but a more protracted recovery in 2021 and 2022. this forecast is subject to substantial downside risks stemming from the uncertainty concerning the further spread of coronavirus. unique features : a health crisis truly global in scope the current crisis has two unique features that distinguish it from all preceding crises of the past decades : it started off as a health crisis, but has immediately morphed into an economic crisis, and it seems to be unprecedented in terms of its global coverage, simultaneity and economic severity. let me first elaborate on the first distinguishing feature : the stringent containment measures in response to the health crisis set the ground for a major economic downturn. the current surge in infection numbers, especially in many countries of the cesee region, does not bode well for a change in the crisis response in the near future : we may see more stringent containment measures over the winter, as has already been witnessed in the czech republic and slovakia. thus, the substantial downside risks are, in part, already materializing. this will aggravate the economic burden. let me now move on to the second distinguishing feature : the crisis is truly global in nature. hence, we are confronted with a simultaneous shock to both domestic and external demand. in addition, an unprecedented degree of uncertainty is weighing negatively on consumption and investment. as a result, especially small, open and strongly integrated economies – like the cesee countries – are highly vulnerable in economic terms. before relating these two features to the topic of this year ’ s conference, let me briefly review the most recent economic developments in the cesee region. largest recession since the early 1990s in the second quarter of 2020, several cesee countries reported the largest quarterly decline in economic activity since the early years of transition in the 1990s. despite the depth of the gdp decline in the second quarter of 2020, the cesee region still reported more benign real gdp decline figures than the euro area ( – 7. 3 % compared to – 11. 8 %, quarter on quarter ). the summer months allowed for a breather ; however, the swift economic recovery is likely to be short - lived. this is, at least, indicated by the most recent readings of activity as well as sentiment indicators. against the background of rapidly rising infection numbers, improvements in these indicators have stalled in the past few weeks ( schreiner et al., 2020 ). economic policy has come | 1 |
bond market. we have seen a favourable response to the abf hong kong fund, and i hope that the paif, with its broader investor base, will also be well received by markets. i wish you every success in promoting the paif. thank you. | mr thiessen discusses the effect on the canadian economy of recent global financial turbulence remarks by gordon g thiessen, governor of the bank of canada, to the “ chambre de commerce de la region sherbrookoise ” in sherbrooke, quebec on 4 may 1999. global financial turbulence and the canadian economy the world economy and canada have had to navigate some difficult straits in the past couple of years. but we have made it through. and considering the tide from the asian financial crisis that washed around the world, the canadian economy has coped better this time around than in the past. with the clouds of international uncertainty gradually lifting, canada ’ s solid economic foundations are providing good reason to remain positive about the outlook for our economy. today, i would like to talk about recent economic developments and the prospects for canada. but since much of what has been happening here recently has been heavily influenced by external events, i would also like to discuss some of the measures the international community is contemplating to prevent, or at least reduce the severity of, any future crises. recent developments in the canadian economy the financial crisis that began in southeast asia in mid - 1997 turned out to be much more persistent and serious than anyone had expected. during 1998, the turmoil spread to russia and brazil, causing a great deal of nervousness and volatility in markets everywhere. this led to large outflows of capital from many emerging - market economies, rising interest rates, tighter credit conditions, and a marked slowdown in economic growth worldwide. canada has not been insulated from these forces. many of our industries, including those in quebec, have been hard hit. the most immediate impact on our economy has been the lower foreign demand for the key primary commodities we produce and a 20 per cent drop in their prices between the middle of 1997 and the end of 1998. these developments were reflected in the value of our currency, which declined sharply against the u. s. dollar. as the turmoil in markets increased following the russian debt moratorium last august, the bank of canada moved to head off signs of a potential loss of confidence in canadian dollar investments, by raising the bank rate one full percentage point. the confidence of households and businesses in canada was also affected by market nervousness and volatility, and this dampened domestic spending. consequently, the canadian economy expanded by just under 3 per cent through 1998 ( fourth quarter over fourth quarter ) compared with over 4 per cent in 1997. considering the seriousness of | 0 |
this is the core business of the swiss financial industry. further progress will depend in large measure on what the outlined background conditions will look like in future. in this context, it is the overall situation that counts rather than conditions in a certain area. outlook at the turn of the century, switzerland is economically and socially in good condition. following years of frequently painful adjustments to a changing environment, preconditions for a balanced development are favourable. the quality and scope of these adjustments bear witness to the flexibility of our economy and society. the years ahead will continue to be characterised by constant change. it is therefore important to remain vigilant. on the basis of overall economic as well as social stability, innovative power and flexibility must be preserved. in a mature society, this represents a particular challenge. by keeping our own house in order, we also make the best possible contribution to international solidarity. in the narrower european context, our bilateral agreements with the european union will form a good basis for cooperation in the coming years. in europe and beyond, switzerland traditionally has an extensive network of international relations which we shall continue to cultivate in the future. as far as these relations are of a political nature, an appropriate social consensus is necessary for doing so. the further development of our financial centre will depend on whether we succeed in continuing to guarantee the attributes mentioned earlier on : integrity, stability and quality. this requires efforts both on an individual and on an overall economic level. a sustained commitment in both spheres will permit existing opportunities to be used. | this is no mean task – it implies by 2030 installing every day the generation capacity of what is currently the world ’ s biggest solar farm. third, hydrogen will be an important new hope for decarbonisation. this involves using renewable energy to split water molecules to produce both hydrogen and oxygen. the hydrogen can be burnt as a fuel emitting only water vapour or be put into a fuel cell to make electricity on demand. it can also be used as a feedstock to make more energy - dense compounds such as ammonia, which can serve as a fuel itself. hydrogen and ammonia can be critical to the transition to a net - zero world given their potential role in decarbonising hard - to - electrify sectors, such as steel production ; fuelling trucks, ships, and other heavy vehicles. all of this is technologically possible but making it economically efficient will require further innovation. in singapore, our aim is to progressively decarbonise the power sector. we do not have the land for large solar or wind farms or fast flowing rivers for hydro - electric power. but it helps that singapore is already less carbon - intensive in power generation than many other countries that still use coal. we are working to increase the carbon efficiency of natural gas which today accounts for 95 % of electricity generation and is likely to remain the dominant energy source for some time. we are accelerating solar deployment across the island and building viable energy storage systems. using our reservoirs, we are opening one of the world ’ s largest floating solar energy systems. we are using transmission lines linked to neighbouring countries to import the renewable energy they produce. singapore has already started importing from laos energy from hydroelectric power. we are exploring geothermal and biomethane technologies as well as small modular reactors using nuclear fission. green economy the third imperative for the net zero transition is to green the economy. greening the existing economy is more important than growing new green sectors. investing in green technologies and renewable energy is important. but such pure green activities are estimated to make up less than 8 % of the global economy. non - green activities – in manufacturing, building and construction, aviation, maritime, agriculture and fisheries - make up the bulk of any economy. to move the needle on emissions reduction, we need transition strategies that progressively reduce the carbon footprint across all sectors. let me highlight six challenges associated with greening the global economy. first, a green economy will rely much more on electricity. the cheapest and easiest way to | 0 |
advance towards the standardisation of islamic finance regulation, breaking the existing jurisdictional heterogeneity, in order to take advantage of a wider international market. the second challenge refers to the integration of islamic finance into the wider financial system. in this area, islamic finance instruments will have to comply with conventional or general financial regulation, while maintaining their specificities. in particular, the contractbased nature of islamic finance normally linked to an underlying asset poses challenges in areas such as risk weight analysis and the fiscal treatment of islamic - type instruments. bis central bankers ’ speeches financial instruments have to be carefully calibrated to take due account of the risks linked to the underlying asset and its liquidity. in taxation, there are problems of double or multiple taxation and equality of treatment with interest - based instruments that also need to be addressed. several european countries are adapting their legislation in this respect. in addressing these regulatory challenges, the ifsb is playing a very important role by providing a forum for coordination and dissemination of better international practices. it is also contributing to the integration of islamic finance into the general framework of conventional finance regulation, as established by international bodies, such as the fsb itself and the basel committee on banking supervision. in parallel, other institutions such as the g20, the imf and the world bank are stepping up their efforts to further the analysis of islamic finance and to identify the necessary reforms to its insertion in the international financial system. many of these issues will be dealt with in the different sessions of today´s forum. the agenda includes four technical sessions on regulatory aspects and the specific challenges regarding sukuk markets, equity - based financing and financial inclusion. we have a diverse audience with well - known experts on islamic finance and market participants who, i am sure, will provide us with a fruitful encounter. let me thank the ie again for hosting the event and the ifsb and mr. jaseem ahmed for bringing this initiative to madrid. i wish you all a very successful forum. bis central bankers ’ speeches | requirements needed to address this challenge. nor should we forget that central banks are also important investors in the debt markets, both in the area of monetary policy and reserve management. although we have not yet included environmental risk assessment in our credit analysis, we are working to remedy this. esg - environmental, social and governance. 8 / 9 in the framework of the eurosystem, an in - depth review of risk assessment processes is under way, aiming to ensure that all relevant factors – such as environmental ones – are taken into account for prudent central bank portfolio management. consideration and application of these criteria is without doubt a new development, and also for central banks. in september, for instance, the banco de espana made its first green investment, participating in a fund launched by the bank for international settlements ( bis ) that invests entirely in green bonds. with this type of initiative the banco de espana aims to include environmental sustainability goals in its reserve management. this is consistent with its membership of the ngfs, which less than two weeks ago published a sustainable and responsible investment guide for central banks ’ portfolio management. conclusions i wish to conclude by emphasising, once more, how important it is that the financial sector contribute to the collective effort that meeting the goals set in the paris agreement represents. the decarbonisation goals set by the commission for 2050 pose a major challenge. 2050 may seem a long way off, but if we wish to meet these goals it is clear that the public at large, firms, banks, governments and public authorities will all have to start addressing the challenge today, with a sufficiently ambitious but also realistic approach. the path ahead, to incorporate environmental risk into internal control and management, is a considerable one and we, as supervisors, also have much work before us. yet we set out on this path only very recently and i must say that the progress made has been surprisingly fast. for all our sakes, we trust that we will be up to the challenge. thank you. 9 / 9 | 0.5 |
cautionary lesson from the increase in borrower default risk observed in the sub - prime segment of the us retail market. the risk may be less pronounced in continental europe, but i would point out that margins on mortgage lending are already thin and that there is a trend towards longer loan maturities. i am therefore calling on french banks to make sure that they closely monitor their borrower risk exposure. so far, the earnings slowdown in retail banking has been mitigated by good performances in corporate and investment banking, private banking, and personal asset management, which provided new growth opportunities. through mergers and acquisitions, including leveraged buy - outs ( lbos ), banks were able to increase the proportion of income generated by non intermediation activities. the recent competitive environment has actually fostered the gradual transformation of banking activities, with a greater emphasis on the " originate and distribute " business model. with this model, credit institutions arrange financings but quickly offload a substantial portion of their risks, for example through securitisation, and take payment – much more so than in the past – in the form of fees and commissions. but although activity in new products such as lbos is helping to boost french banks'revenues and earnings, it is also a source of vulnerability. first, in terms of remuneration, fierce competition among credit institutions is not only exerting downward pressure on margins ; it is encouraging " covenant - lite " deals – a worrying trend. these complex transactions are also beginning to generate new risks. on this point, there is a tendency towards longer underwriting periods, during which banks bear the bulk of the risk. banks should also pay attention to the fact that counterparties such as hedge funds are becoming increasingly involved in this type of deals. allow me two brief asides, if you will. first, with regard to lbos, let me refer you to the study appended to the annual report. on the topic of hedge funds, i would remind you that the banque de france devoted a special issue of its financial stability review to this subject and that the commission bancaire pays close attention to banks'involvement with this type of counterparty. let me also say that we now comply fully with the recommendations set out in the financial stability forum report commissioned by the g8 and published on the 19th may 2007. getting back to the banking system, i believe that, in light of these developments, banks should adopt an appropriate scale of charges and, more | christian noyer : france ’ s banking industry in 2006 – key trends speech by mr christian noyer, governor of the bank of france and chairman of the french banking commission, at the presentation of the 2006 annual report of the french banking commission, paris, 29 june 2007. * * * welcome to this press breakfast, organised for the release today of the 2006 annual report of the commission bancaire. i would like to discuss the key trends that characterised france's banking industry in 2006, not just in terms of structure and performance but also the regulatory environment in which it operates. it is clear that the framework for financial activity and banking risk management has changed in recent months, confirming the ever more urgent need for new methods of risk assessment and for appropriate supervision that can react swiftly to these changes. in my view, several factors are important in this respect. first, in a highly international context, banks'performances are increasingly being judged from the outside, especially by shareholders. those judgements are sometimes so harsh that they can have a direct structural impact. consequently, banks can no longer afford simply to post excellent results – as again was the case in 2006 for most major international banks, especially french banks. they must also make sure that the underlying quality of those results is sound. to do this, they must pay special attention to the way they manage risks internally and plan their strategic expansion, and to their capital adequacy policy. second, the economic and financial context in which french banks are operating is also a source of risks. indeed, lessons must be learned from the slowdown in the usa, amply illustrated by the housing downturn, which resulted in higher risk in the sub - prime segments of the retail banking market. it should also be acknowledged that financial markets could become more unsettled. if higher risk aversion were to encourage greater use of risk transfer products, this could drain liquidity from some markets and undermine the efficiency of banks'management. from a supervisory perspective, the problem is all the more acute since the growing reliance on credit risk transfer instruments tends to make it harder to assess the type and degree of risk that banks actually bear when, for example, they arrange complex transactions. third, the regulatory environment for french banks is changing radically as a result of the basel ii accords. banks that have adopted the advanced approaches to risk management must put models in place – usually as early as january 2008 – for the internal rating and assessment of credit risk, market risk | 1 |
as of the financial system and the economy as a whole. this summer, ecb banking supervision ran a climate stress test that showed that many banks still have their work cut out for them when it comes to managing climate risks. 4 ngfs climate scenarios that stress test was based on a set of scenarios developed by the network for greening the financial system ( ngfs ). the ngfs is a network of more than 120 central banks and supervisors that aims to support sustainable transformation. the ngfs scenarios help quantify the economic impacts of different emission and policy pathways. the most recent update considered physical risks for the first time and took an improved look at regional and sectoral factors. the ngfs is continuing to upgrade the scenarios and their practical usability a€ “ also with a view to transition plans. the ngfs is working out how transition plans relate to supervisors'roles and mandates and how they could become part of the supervisory toolkit. 5 conclusion many aspects of transition plans are still up for discussion. the same is true for the role of supervisors when it comes to checking these plans. events like this are good opportunities to consider such fundamental questions. so let us discuss ways forward and find common ground internationally. the goal is clear : to define ambitions and to turn these ambitions into actions. 2 / 2 bis - central bankers'speeches | from ethiopia, russia, ukraine, belarus, lithuania, moldova, bulgaria, kazakhstan, turkmenistan, azerbaijan, uzbekistan, iran, australia, the uk, germany, france, the u. s., argentina, uruguay, and brazil. i, too, am an ‘ oleh. it makes me proud, as an israeli and as a recent immigrant, to see the young immigrants integrating beautifully in israel and doing well in their fields of study. the more able israel is to grow over time, and the better its education system, the more successful we will be in attracting immigration that attracts immigration – because of zionism, yes, but also because it ’ s a country that is worth living in. thus far, i ’ ve spoken about the social and national levels. but this event is above all an important one at the personal level. each of you has reached at a critical phase in your lives. the path you choose to follow in the coming years will affect your future. it sounds very important, and indeed it is. but student life may also be very enjoyable. it is my wish that each of you should seize firmly the opportunities that lie ahead. enjoy yourselves, and, the main thing, be successful! thank you. may you succeed. | 0 |
important, a more active monitoring from the people we serve will also reduce the risk of complacency creeping in. in fact, being ‘ trusted by the public ’ is one of the five indicators we track to assess whether or not our current strategy is making a positive difference to the wellbeing of our citizens. 24 specifically, we have decided that achieving a ‘ 75 per cent trust score ’ is one of the key indicators for measuring the impact of our strategic plan. conclusion let me conclude. the central bank ’ s founding legislation states that our constant and predominant aim shall be the welfare of the people as a whole. we and other central banks need trust to succeed. trust is stronger where social capital is strong, central banks can help to build social capital through their actions. for my part, my vision is that of an engaged, open and connected central bank. we need to communicate continuously and transparently with active and increasingly - involved citizens. we have a role to contribute to the building of social capital and also perhaps, as minouche shafik has argued, the creation of a new social contract which strengthens the architecture of opportunity in our community. 25 it will require, i suggest, for those of us working in the world of central banking and also teaching in the world of economics to invest in more integrated, more multi - disciplinary and more longer - term thinking. in short it will require us to give our macroeconomic frameworks a greater intergenerational focus and as a result strengthen and grow our economic capital. acknowledgments : i would like to thank giuseppe corbisiero and reamonn lyndon for their assistance with this speech. [ 1 ] see makhlouf ( march, 2018 ) “ natural capital and the living standards framework ” for my views on natural capital and why it matters for wellbeing. [ 2 ] for more on “ climate change and the strategy review ”, see the ecb strategy review webpage. [ 3 ] see biden - harris administration ( january, 2023 ) “ national strategy to develop statistics for environmental economic decisions ”. [ 4 ] makhlouf, gabriel. “ social capital and the living standards framework ”. address to university of auckland ( 27 march 2018 ). [ 5 ] the world bank assigns social capital concepts to three broad groups. ‘ horizontal associations ’ refers to social networks, organisations or groups in society that facilitate coordination and cooperation. ‘ vertical associations ’ are ties that link | urjit r patel : agricultural debt waiver - efficacy and limitations opening remarks by dr urjit r patel, governor of the reserve bank of india, at the seminar on " agricultural debt waiver - efficacy and limitations ", mumbai, 31 august 2017. * * * ladies and gentlemen, on behalf of the reserve bank of india, i warmly welcome you and thank you for accepting our invitation to join us today in this seminar. 1. in the recent period, farm loan waivers have engaged intense attention among the farming community, policy makers, academics, analysts and researchers. on the one hand, there is a gamut of issues that have intensified the anguish of our farmers. in this context, farm loan waivers have brought forward the urgency of designing lasting solutions to the structural malaise that affects indian agriculture. on the other, there are concerns about the macroeconomic and financial implications, how long they will persist in impacting the economy, the possible distortions that they could confront public policies with, and the ultimate incidence of the financial burden. 2. let me, in a modest way, try to eclectically address both sides of the debate. india's agrarian economy is the source of around 15 percent of gdp, 11 per cent of our exports and provides livelihood to about half of india's population. the importance of the sector from a macroeconomic perspective is also reflected in a significant flow of bank credit to finance agricultural and allied activities relative to other sectors of the economy. outstanding bank advances to agriculture and allied activities have risen from about 13 per cent of gdp originating in agriculture and allied activities in 2000 - 01 to around 53 per cent in 2016 - 17 ( chart 1 ). in real terms ( adjusted for inflation measured by the gdp deflator ), the growth of bank credit to agriculture and allied activities accelerated from 2. 6 per cent in the 1990s to 15. 4 per cent during 2000 - 01 to 2016 - 17. 3. much of this credit flow has been propelled by the policy thrust on expanding credit to agriculture, especially through priority sector lending ( psl ) stipulations. public sector banks and private banks are required to lend 18 per cent of annual net bank credit ( anbc ) or credit 1 / 4 bis central bankers'speeches equivalent amounts of off - balance sheet exposures, whichever is higher, to agriculture. under this carve - out, 8 per cent is prescribed for small and marginal farmers. even foreign banks with 20 branches and above have to achieve | 0 |
##s are repaired. where does all this leave us? the argument that it ’ s possible to grow the economy without much increase in inflation is, of course, seductive and enticing. it ’ s like being offered a free lunch. and yes, there are some grounds for thinking that the trade - off between growth and inflation may well be unusually favourable. but how strong those mechanisms actually are is far from clear. and it seems for a more detailed discussion of some of these points, see mccafferty ( 2013 ). there are a number of empirical studies that suggest financial crisis can have material effects on productivity and output. see, for example, furceri, d and mouragane, a ( 2009 ), oulton, n and sebastia - barriel, m ( 2013 ), imf world economic outlook ( 2009 ). bis central bankers ’ speeches particularly optimistic to assume that the financial crisis and the near crippling of our banking system has played little role in the recent limp supply - side performance of our economy. taken to its limit, the argument that monetary policy can be used to expand demand with little or no implications for inflation challenges the consensus that the best contribution that monetary policy can make to the long - term health and prosperity of the economy is to deliver price stability. that consensus is based on painful experience that monetary policy can ’ t affect the level of output in the long run. that we can ’ t generate permanently higher output and permanently higher employment simply by printing more money. 9 we should be nervous about how quickly we overturn that consensus. conclusion and summary let me conclude. the financial crisis has thrust the rather reserved world of central banking and monetary policy into the spotlight. that is both understandable and healthy. monetary policy failed to prevent the financial crisis. and in many countries, including the uk, it has failed to stimulate the growth that we all long to see. it ’ s only right that inflation targeting – the dominant paradigm governing the operation of monetary policy in much of the industrialised world – should be questioned and challenged. and to my mind it has a good story to tell. the inflation target ensures that the primary objective of monetary policy is to deliver price stability. but it affords the flexibility that it can be operated in such a way as to support output and employment. the mpc has used that flexibility to the full in recent years : it has been at the forefront of providing support to our economy in the aftermath of | those with autism. page ( 2007 ). “ beautiful minds, wasted : how not to squander the potential of autistic people ”, the economist april 2016. temple grandin ( 2011 ). bis central bankers ’ speeches once cognitive diversity is recognised, the next step is measurement. this, too, is far from straightforward because the dimensions of cognition and personality are many and varied. yet there is no shortage of psychometric tests these days which seek to capture these many and various dimensions. and, increasingly, these tests are being applied in recruitment decisions, when seeking to match the characteristics of potential employees to an organisation. these same tests have been far less often used by organisations to gauge the cognitive diversity of their existing employees. for example, there is no reason they could not be used to construct a cognitive map of an entire organisation to gauge its degree of cognitive diversity. making transparent that cognitive map would then provide incentives to take seriously any lack of cognitive diversity, as well as enabling peer comparison. as the measurement technology exists, these would be big but eminently feasible steps for organisations to take. to be futuristic for a moment, magnetic resonance imaging ( mri ) scans these days provide a different lens on cognitive and personality traits – a techni - colour cognitive map. it is early days to be drawing firm links between the brain ’ s wiring and individual character traits, but progress has been rapid. as one example, the neuro - biology company emotiv lifesciences has created a brainwave reading rig, which offers real - time analysis of cognitive activity. 65 while we are some way from arming ourselves with only an mri scan when judging performance and potential, perhaps in future that will not seem so fanciful. the bank is taking steps to improve its own cognitive diversity. for example, it has sought to widen the range of disciplines from which it recruits over the past few years. of this year ’ s graduate cohort, only 40 % has a degree in pure economics and finance. i say “ only ” because, as recently as 2009, the corresponding fraction would have been 60 %. this year ’ s graduate cohort is drawn from diverse disciplines ranging from particle physics to aerospace engineering to ancient history. disciplinary diversity is on the rise. that in part reflects changes to the bank ’ s responsibilities, as over recent years it has taken on new staff and new tasks. those tasks require different skills and experience – commercial and operational skills, as well as analytical. that has | 0 |
be primarily driven by security risks subsiding. liberation of occupied territories, setting up production and logistics, and increased capability of maritime logistics will help reduce inflationary pressures. furthermore, steady disinflation in 2023 will be facilitated by : well - coordinated fiscal and monetary policies complete cessation of monetary financing of the budget deficit next year the nbu keeping monetary conditions relatively tight. at the same time, the ukrainian economy will continue facing limited logistics and electricity shortages in the long run. weaker consumer demand will be able to only partially offset the effects from higher production costs. therefore, the nbu continues to expect inflation to decelerate gradually and exceed the central bank's 5 % target in 2023 – 2024. under such conditions, the nbu will focus on maintaining control of inflation expectations and reining in inflation processes. sufficient and regular inflows of international financing and cooperation with the imf are an important precondition for the stable functioning of the economy in wartime. international financial assistance to ukraine considerably increased in h2 2022. it is forecast to exceed usd 31 billion by the end of the year. i'd like to thank all of the international financial organizations and ukraine's partner countries for the unprecedented support they have provided to the country as it fights for the values all civilized countries share. international financial assistance needed to finance the budget deficit and restore the economy will continue to arrive into 2023. more specifically, the european union and the unites states have already announced their preliminary intentions to provide ukraine with eur 18 billion and about usd 10 billion respectively. what is more, the nbu has made some progress in negotiating with the imf a new monitoring program involving the imf executive board. once finalized, this program will help ukraine obtain financing from other international donors in 2023. the nbu expects that an extended fund facility will be approved for ukraine after the monitoring program expires. 2 / 4 bis - central bankers'speeches ukraine is also negotiating over obtaining financing from other partner countries and donors. a war and escalating attacks on the country's critical infrastructure remain the key risks for ukraine's economic development. overall, risks for the economy remain elevated. on the one hand, the threat that the " grain corridor " will cease operating and risks that ukraine will not obtain enough external financing has declined. in addition, the smaller extent of the nbu's interventions to sell fx and larger international reserves have bolstered the central | andriy pyshnyy : national bank of ukraine press briefing - monetary policy decisions speech by mr andriy pyshnyy, governor of the national bank of ukraine, at a press briefing on monetary policy decisions, kyiv, 8 december 2022. * * * dear colleagues, i would like to inform you that the board of the national bank of ukraine has decided to keep the key policy rate at 25 % per annum. the nbu has also decided to raise reserve requirements for banks. this will enhance monetary transmission, support exchange rate stability, and gradually slow inflation in 2023. inflation continues to grow as expected, but the growth is slower than forecast by the nbu. the consequences of the war are the main reason behind this year's increase in inflation. they lead to higher production costs and shortages of some goods. in particular, an escalation of attacks against energy infrastructure of ukraine : affects economic activity in various sectors – from metals industry to food industry, animal farming, and the services sector causes production cuts, leading to a decrease in supply of goods spurs households'demand for fuel, which creates additional pressure on energy prices. all of the above is driving an increase in prices for a wide range of goods and services, with prices for some items surging. at the same time, overall inflation dynamics remain under control, and prices are rising slightly slower than forecast by the nbu. first, the gradual tightening of monetary conditions following the key policy rate hike to 25 % in june and fixing the official hryvnia exchange rate are playing a major role in stabilizing inflation expectations. second, fx market regulation and the introduction of new savings protection instruments contributed to a narrowing of the spread between the hryvnia exchange rate on the cash market and the official exchange rate. third, the nbu and the government are following their joint plan to cut monetary financing of the budget deficit. coupled with the above factors, this helps ease pressures on the fx market and reduce net fx sales by the nbu. 1 / 4 bis - central bankers'speeches in addition, large inflows of financial assistance drove an increase in international reserves to almost usd 28 billion, which exceeds the pre - war level. this strengthens the nbu's capability to maintain exchange rate stability. unchanged utility tariffs also remain important for restraining inflation. after this year's inflation surge, the growth in consumer prices will slow as of the end of next year. this should | 1 |
andreas dombret : deutsche bundesbank ’ s 2012 financial stability review – the risks to the german financial system speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the presentation of the deutsche bundesbank ’ s financial stability review 2012 “ the risks to the german financial system ”, frankfurt am main, 14 november 2012. * 1. * * risks : an overview the risks to the german financial system remain high. for a number of years now, we have seen the risk situation being shaped by the development of the financial and debt crisis. i do not expect these factors to decouple in the near future. that is why the european sovereign debt crisis remains the greatest threat to financial stability in germany. at the same time, the risk map will need to be redrawn, as monetary and fiscal policy measures on a massive scale were needed to stabilise the financial system. this has entailed an ever greater transfer of risk to the public sector and has caused the low - interest rate environment to become entrenched. the side - effects of short - term stabilisation measures can leave a difficult legacy for financial stability in the medium to long term. that is why we need to make a distinction between acute risks and medium - term risks. acute risks are like a rear - view mirror in which the financial and sovereign debt crisis is visible. acute risks are located primarily in the legacy portfolios of asset - backed securities and sovereign risk in the context of the sovereign debt crisis. medium - term risks, meanwhile, require us to look ahead and consider what might be around the next corner. preventive macroprudential oversight has to take medium - term risk factors very seriously. its task is to promptly identify potentially unhealthy developments that might unfold and endanger financial stability in the future. today, we can see a growing number of the risk factors that played a role in the run - up to the financial crisis. the financial stability review 2012 addresses three topics : • first, the entrenched low - interest rate environment. this is spurring the search for yield. • second, real estate prices. these are showing accelerated growth in germany ’ s urban centres. the experiences of other countries show that precisely such an environment of low interest rates and high liquidity can encourage exaggerations on the real estate markets. and this can pose a considerable threat to financial stability. • lastly, the global shadow banking | 7. necessary measures : what needs to be done? our financial stability review, however, seeks not just to identify risks, but also points out the measures that need to be taken to safeguard the stability of the financial system over the medium to long term. german credit institutions can contribute greatly to protecting themselves, and the financial system, against the build - up of risk via the real estate market. it is essential that they maintain the conservative terms of real estate loans. the report also refers to the foreseeable medium to long - term challenges to banks and their earnings. above all, they should not attempt to take advantage of the low - interest rate environment in order to delay the clean - up of bank balance sheets. in the low - interest rate environment, german insurers naturally need to continue to make provisions in order to sustain guaranteed returns in future as well. policymakers, too, have to contribute to financial stability. the major policy decisions – where push comes to shove, so to speak – have to be the right ones ; therefore, • monetary policy should not be overburdened, • the reform course should be continued in europe • and the ability of the banking union to function should be ensured – before the transfer of competencies to the european level. in addition, financial market reform needs to be given an additional boost. • the shadow banking system must be broadly identified. • attention should be paid to the coherence and cumulative impact of financial market regulation. • international implementation of derivatives market regulation must be expedited. • and – very importantly – credible resolution regimes need to be introduced in order to bring the “ too big to fail ” problem under control once and for all. bis central bankers ’ speeches | 1 |
fernandez - arias ( 2001 ), “ foreign direct investment : good cholesterol? ”, in “ foreign direct investments versus other flows to latin america ”, edited by de macedo, j. b., and e. v. iglesias. see n. halov and f. heider ( 2011 ), “ capital structure, risk, and asymmetric information ”, quarterly journal of finance, 1, 767 – 809. see committee on international economic policy and reform ( 2012 ). “ banks and cross - border capital flows : policy challenges and regulatory responses ”, published online at http : / / www. brookings. edu / research / reports / 2012 / 09 / ciepr - banks - capital - flows. see a. popov, “ does private equity investment spur innovation? evidence from europe ”, ecb working paper, 1063, and “ on the real effects of private equity investment : evidence from new business creation ”, ecb working paper, 1078. see r. lucas ( 1990 ), “ why doesn ’ t capital flow from rich to poor countries? ”, american economic review, 80, 92 – 96, and p. o. gourinchas and o. jeanne ( 2007 ), “ capital flows to developing countries : the allocation puzzle ”, nber working paper, 13602. bis central bankers ’ speeches with a stringent enforcement of the macroeconomic imbalance procedure, 14 can help to alleviate such cross - border misallocations in the future. 5. conclusion let me conclude. although still preliminary, the recent signs of financial re - integration across several financial market segments have the potential to be self - reinforcing and unleash virtuous dynamics. the creation of a fully - fledged banking union can set incentives for more and better financial integration, in a way that will make the euro area banking sector less vulnerable to fragmentation along national borders and reduce pro - cyclicality in euro area economies. on top of being conducive to a more stable financial system, it will thereby be conducive to a more efficient allocation of resources. for once, there is no trade - off between efficiency and stability. see online : european commission > economic and financial affairs > eu economic governance > macroeconomic imbalance procedure. bis central bankers ’ speeches | corresponding standard deviation within domestic borders. this is a sign that market participants are demanding an extra premium to lend to counterparties located in other countries. this premium rises when market conditions are tense. during the crisis, this was the case for both one - month rates and 12 - month rates. as a consequence of the interbank market stress, the ecb had to step up its intermediation role, reacting with non - standard monetary policy measures, such as a fixed - rate full - allotment liquidity policy. bis central bankers ’ speeches there is a similar phenomenon in the overnight unsecured money market and the secured money market. the latter is usually more resilient in times of crisis. a significant rise in price differentiation in repo markets has occurred as market participants have increasingly taken “ correlation risks ” into account : the pricing of risk has become much more dependent on the geographic origin of both the counterparty and the collateral, in particular when these are from the same country. an additional sign of risk aversion is that market participants have shifted from the unsecured to the secured market. let me now address cross - border lending by banks. looking at price - based indicators, we see two different phases ; first, until 2007, a gradual convergence across countries of the rates that banks charged for new loans to non - financial corporations. and then, from 2008 onwards, a considerable reversal of that trend. cross - sectional variation is particularly pronounced for smaller loans up to €1 million. of course, higher credit risk in lending to firms from some countries in recession explains some of the observed cross - country variation, and higher rates on smaller loans may also be an indication of higher risk and of the agency cost of monitoring smaller projects. quantity - based indicators point to a relatively slower pace of financial integration in the retail banking sector before the crisis. overall, outstanding cross - border loans to the non - financial sector in other euro area countries increased by only a few percentage points over the last decade. for sure, the process of financial integration in retail banking – though steady and significant – was particularly slow. on the positive side, the reversal of that trend during the crisis has also been more muted than in other market segments. the evidence points towards a slow erosion of the earlier slow progress toward financial integration. bis central bankers ’ speeches in 2010, at the outset of the sovereign debt crisis, only three relatively small countries were strongly affected. later on, however, the bond yields of larger | 1 |
. s. bond portfolios do not indicate a worrisome pickup in risk - taking in external investments. but it is important to recognize that portfolio reallocations that seem relatively small for u. s. investors can loom large from the perspective of the foreign recipients of these flows. at roughly $ 400 billion at the end of 2012, emerging market bonds accounted for a tiny fraction of the roughly $ 25 trillion in bonds held by u. s. investors. but to the recipient countries, these holdings can account for a large fraction of their bond markets. even relatively small changes in these u. s. holdings can generate large asset price responses, as was certainly the case in the summer of 2013. likewise, a reassessment of risk - return tradeoffs could disrupt financing for projects that are dependent on the willingness of investors to participate in global syndicated loan markets. we take the consequences of such spillovers seriously, and the federal reserve is intent on communicating its policy intentions as clearly as possible in order to reduce the likelihood of future disruptions to markets. we will continue to monitor investor behavior closely, both domestically and internationally. see carol bertaut and alexandra tabova ( 2014 ), “ reach for yield versus search for safety, ” unpublished paper, board of governors of the federal reserve system. see carol bertaut, alexandra tabova, and vivian wong ( 2014 ), “ the replacement of safe assets : evidence from the u. s. bond portfolio ( pdf ), ” international finance discussion papers 1123 ( washington : board of governors of the federal reserve system, october ). bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches | va., september 18 – 19, and seung jung lee, lucy qian liu, and viktors stebunovs ( 2014 ), “ risk - taking and interest rates : evidence from decades in the global syndicated loan market, ” unpublished paper, board of governors of the federal reserve system. see jerome h. powell ( 2013 ), “ advanced economy monetary policy and emerging market economies, ” speech delivered at the federal reserve bank of san francisco 2013 asia economic policy conference, san francisco, november 4. see shaghil ahmed and andrei zlate ( 2013 ), “ capital flows to emerging market economies : a brave new world? “ international finance discussion papers 1081 ( washington : board of governors of the federal reserve system, june ) ; david bowman, juan m. londono, and horacio sapriza ( 2014 ), “ u. s. unconventional monetary policy and transmission to emerging market economies, ” international finance discussion papers 1109 ( washington : board of governors of the federal reserve system, june ) ; and marcel fratzscher, marco lo duca, and roland straub ( 2013 ), “ on the international spillovers of u. s. quantitative easing ( pdf ), ” ecb working paper series 1557 ( frankfurt, germany : european central bank, june ). bis central bankers ’ speeches ex post, these portfolio reallocations delivered a higher return to u. s. investors on this part of their portfolio relative to what they would have received if they had left portfolio compositions unchanged at the average shares in 2008 and 2009, but at a cost to the portfolio ’ s credit quality ( figure 6 ). regression results confirm that in choosing among foreign government bonds, u. s. investors have put more weight on returns since the crisis. 6 but search for higher returns has not been the only motivation for international investors post - crisis : demand for liquid high - grade “ safe ” or money - like assets has also increased from foreign official investors for investment of foreign exchange reserves, from pension funds and other institutions who face portfolio allocation constraints or regulatory requirements, and from investment strategies requiring cash - like assets for margining and other collateral purposes. some shift to safe assets is also seen in u. s. portfolios : u. s. investors actively rebalanced their holdings of foreign financial sector bonds toward those with higher credit ratings, but at some cost in returns ( figure 7 ; figure 8 ). 7 taken together, developments in u | 1 |
s conduct of monetary policy next, i would like to explain the bank's conduct of monetary policy including the measures decided at the mpm held two days ago. the bank has been pursuing powerful monetary easing under the policy framework of " qqe with yield curve control, " aiming to achieve the price stability target of 2 percent ( chart 10 ). in order to achieve the price stability target at the earliest possible time, the bank set the target level of 10 - year japanese government bond ( jgb ) yields at around zero percent, and has purchased large amount of jgbs so that the yield curve would be formed in line with the target. by conducting this operation, short - and long - term interest rates have been stable at low levels and lending rates as well as issuance rates for corporate bonds - - to which certain spreads are added in both cases - - also have remained at extremely low levels. the amount outstanding of bank lending has been increasing firmly. thus, the current highly accommodative financial conditions, brought about by yield curve control, have largely contributed to an improvement in the output gap, stimulating firms'and households'spending activities. in addition, the bank has purchased exchange - traded funds ( etfs ) and japan real estate investment trusts ( j - reits ) with a view to exerting positive effects on economic activity and prices through lowering risk premia in the stock market. as i explained, following the discussion at the latest mpm, the bank released its economic projections, which show that it will take more time than expected to achieve the price stability target of 2 percent. however, the momentum toward 2 percent inflation has been maintained. accordingly, as for the conduct of monetary policy, the bank judged it appropriate to persistently continue with the current powerful monetary easing, thereby maintaining the output gap as long as possible within positive territory, in order to make the momentum sustainable. during the discussion, we thought it necessary to address two challenges. the first is to firmly maintain confidence among the public regarding the bank's current policy stance that aims at achieving the price stability target of 2 percent. the second is to strengthen the sustainability of the current powerful monetary easing so that the effects of monetary easing will not be reduced while taking care of such factors as the negative effects on financial markets, in a situation where monetary easing needs to be continued. in order to address these two challenges, the bank decided to newly implement measures to strengthen the framework of powerful monetary easing. | of a decrease. if the economy continues to move along the expected path, then at some point it will be appropriate to raise interest rates. this will be in the context of an improving economy and 10 / 11 bis central bankers'speeches stronger growth in household incomes. third, the board does not see a strong case for a near - term change in interest rates. there is a reasonable probability that the current setting of monetary policy will be maintained for a while yet. this reflects the fact that the expected progress on our goals for unemployment and inflation is likely to be gradual. the board's view is that it is appropriate to maintain the current setting of policy while this progress is made. thank you for listening. i look forward to your questions. 1 see the banking and finance oath website at < www. thebfo. org / home >. 2 the primary producers bank was wound up in 1931. the bank accounted for less than 0. 5 per cent of australian banks ’ deposits at the time, and the bank ’ s customers lost just 1. 25 per cent of their deposits. see fitz - gibbon b and m gizycki ( 2001 ), ‘ ahistory of last - resort lending and other support for troubled financial institutions in australia ’, rba research discussion paper no 2001 – 07. 11 / 11 bis central bankers'speeches | 0 |
their owners. 4. sovereign risk i now come to my second proposition. we have to consider sovereign risk as the main overarching risk in germany and europe as a whole − all the more so, since there is a strong link between sovereign risk and asset quality and the funding risk of the banking systems concerned. three weeks ago, the european council agreed an important and comprehensive package of measures to tackle the current european debt crisis and obviate future strains. the package includes several elements. the most prominent of these measures is the launch of a permanent financial stability mechanism which will replace the temporary mechanism initiated last year. the permanent mechanism, known as the european stability mechanism, has major features that safeguard effectiveness and prudence. the esm will have a lending capacity of €500 billion. activating the financial assistance mechanism requires a unanimous vote by all participating member states. the granting of any financial assistance will be made subject to strict conditionality. a rigorous analysis of public debt sustainability will be conducted. when debt is considered to be unsustainable the private sector will be involved in restoring the public debt to a sustainable path. it is important to realize that these facilities are bracing europe even for the eventuality of further turmoil. at all events, protecting portugal is not overstretching the available resources. in addition, the euro - area heads of government agreed a so - called euro - plus pact. under the terms of this pact the countries concerned are committed to announce and implement a set of actions to improve their competitiveness. in particular, the countries should link the age of retirement to demographic change and the development of labor costs to the corresponding gains in productivity. furthermore, a reform of the stability and growth pact aims to enhance the surveillance of fiscal policies. for observers outside europe this variety of decisions and instruments may appear puzzling or, at least, complex and complicated. but that simply reflects the unique structure of the european union, which is striving for comprehensive economic and monetary integration without transforming the political system into some kind of a united states of europe. in fact, the determined and comprehensive decisions taken by the european council confirm the union ’ s capacity to act. at the same time, they demonstrate the firm conviction that the euro is contributing to our welfare and competitiveness and remains our common currency. to put it in a nutshell : europe has strengthened the governance of the monetary union and has launched a permanent support facility without transforming the character of the euro area : bis central bankers ’ speeches | andreas dombret : financial stability – challenges from a european perspective luncheon speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the american council on germany in new york, new york, 13 april 2011. * 1. * * welcome address ladies and gentlemen leaving frankfurt heading south on the autobahn, on the right - hand side you suddenly come upon two old planes framing a rampant arch. neither of the two planes is a beauty. nevertheless, the monument is a major attraction. the aircrafts are a douglas c - 47 and a douglas c - 55, which were two of the airplanes deployed by the united states air force during the famous airlift of 1948 to 1949. the arch in the middle of the triptych symbolises that airlift. to this day, germany remembers that crucial moment in time. a living friendship needs the sound foundation of common values and it also needs institutions that cultivate an intellectual and cultural exchange. the american council on germany plays an important role in bringing together leaders from both our countries. i was therefore honored to receive an invitation from you, the american council on germany, to speak to you today. 2. introduction let me start by stating four propositions. with reference to the title of my speech, these propositions should constitute a current european perspective on financial stability. it goes without saying that they are far from being exclusively european. my first proposition is that we have been living with the crisis for four years now. it is too early to announce the advent of a post - crisis economy or a post - crisis financial system. my second proposition is that sovereign risk should be considered the main overarching risk to financial stability in germany and in europe as a whole. nevertheless, my third proposition is that the risk outlook for the german banking system has been improving. my fourth and final proposition is that financial stability constitutes a long - term strategy for forestalling the build - up of cyclical and structural excesses in financial markets. even when acute threats to financial stability may warrant extraordinary measures, policymakers have to keep in mind the longer - term costs of prolonged ad hoc measures if they distort incentives and undermine market discipline. 3. in the fourth year of the crisis let me expand on my first proposition. we have not left the crisis behind us, although the nature of the crisis has obviously changed over the past four years. the crisis that erupted in 2007 had its origins in a set of problems that | 1 |
benjamin e diokno : message for the signing ceremony for architecture and engineering design services for the new bangko sentral ng pilipinas ( bsp ) complex speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the signing ceremony for architecture and engineering design services for the new bsp complex, manila, 27 february 2022. * * * good day, everyone. a year ago, we envisioned a new bsp complex to rise here at the new clark city — one that will become a global benchmark for a smart, green, and modern facility that promotes environmental sustainability and efficiency. to transform that vision into a master development plan, the bsp searched for the best architectural and engineering design which will bring our vision into fruition. the architectural and engineering design will cover the development of 21. 32 hectares of land for the construction of a new bsp office building, bsp data centers, command centers, museum, academic buildings, sports complex, and commercial stalls in the non - restricted and semirestricted zones of the new bsp complex. the design will incorporate a water feature and several greeneries that will allow a comfortable, relaxing, and healthy atmosphere for the employees and visitors of the bsp – one that is available for the entire community. the design will welcome people with open spaces that have extensive and robust security to safeguard the bsp ’ s currency production, data center, and it systems. today, i am pleased to inform you that after undergoing very stringent procurement processes, we have found the design we were looking for. the conceptual design which aidea, ( pronounced like “ idea ” ) presented best represents our vision of a smart, green, and modern bsp. the development plan embodies inclusivity, reflective of the bsp ’ s drive for financial inclusion. with easily accessible, and pedestrian - and bicycle - friendly circulation paths, we are constructing a new bsp complex that is “ for the people. ” furthermore, a museum and a sports complex will help nurture this inclusive environment. the bsp recognizes the impact of climate change in the country ’ s financial system. thus, we are integrating sustainability principles in all ways possible, especially in this infrastructure. this design resonates well with our sustainability agenda. it incorporates sustainable and green design elements and introduces multi - dimensions of sustainability, wellness strategies, and technologies. there will be smart | bank of japan ’ s september report of recent economic and financial developments1 bank of japan, communication, 13 september 1999. * * * the bank ’ s view2 japan ’ s economy has stopped deteriorating, and there are some activities improving such as exports and production. however, clear signs of a self - sustained recovery in private demand have not yet been observed. with regard to final demand, business fixed investment has been on a downward trend. recovery in private consumption continues to be weak on the whole. housing investment, which had been recovering, has recently peaked out. meanwhile, public works have been rising, and net exports ( exports minus imports ) have started growing due to an increase in exports. reflecting such developments in final demand and continued progress in inventory adjustment, industrial production is turning to an increase. against this background, corporate and consumer sentiment has seen an improvement. the improvement in corporate sentiment, however, has not necessarily stimulated business activities, because firms strongly feel that they have excess capacity and employees and their profits remain weak. meanwhile, the improvement in consumer sentiment is underpinning household expenditure even under the worsening employment and income conditions, but is not strong enough to push up overall private consumption. as for the outlook, improvements in the overall financial environment partly due to the monetary easing by the bank, along with a series of economic measures taken by the government, are expected to continue underpinning the economy. moreover, the positive impact on domestic production of the recovery of overseas economies, especially of asian economies, is likely to continue for some time. by contrast, leading indicators suggest a high probability of a moderate decrease in housing investment from this autumn. in addition, under cautious sales plans, firms are implementing further restructuring to improve their profitability. although such corporate restructuring is expected to improve productivity, it is likely, in the short run, to reduce fixed investment and discourage household expenditure through the resulting deterioration in employment and income conditions. moreover, it seems that the recent appreciation of the yen will have an adverse effect on corporate profits in the near term. under such circumstances, it is still difficult to expect an immediate self - sustained recovery in private demand. overall economic developments require careful monitoring in consideration of the above points. it is also important to promote structural reform in order to assure the economy ’ s sustained growth in the medium term. with regard to prices, import prices have recently fallen slightly due to the appreciation of the yen, despite the rise in international commodity prices such as crude oil prices. domestic | 0 |
leverage would amplify any global downturn, especially if it became a recession. it is reassuring that should a storm arrive, the canadian economy and financial system are in a good position to weather it. 18 insurance bureau of canada, 2019 facts of the property and casualty insurance industry in canada. 19 in 2018, canadian asset managers had around $ 2 trillion in assets being managed with explicit environmental, social and governance criteria taken into account. 20 we also recognize it ’ s important to be a leader when it comes to our own operations. we ’ ve developed a multi - year strategy to reduce waste and start measuring — and shrinking — our own carbon footprint. 21 for more details, see the website of the central banks ’ and supervisors ’ network for greening the financial system, which was established in december 2017, and the bank ’ s announcement this past march when we were accepted as a member. | some time yet. even so, as we said in january, we expect that both exports and investment will return to positive growth later this year. since the start of the year, the labour market has continued to show strength. the adjustments underway in our oil sector will eventually be completed. and firms tell us that they need to make new investments, and the recent rules around capital cost allowances are likely to speed that up. the bank ’ s role in this process is to maintain a predictable environment for decision making. we have learned from experience that keeping inflation low, stable and predictable is the best contribution we can make to canada ’ s economic welfare. crucially, our inflation - targeting framework includes a floating exchange rate that helps our economy adjust to external shocks. we only have to look back a few years for an example. following the oil price collapse of 2015, movements in the exchange rate helped to offset the loss of jobs in the oil sector by boosting exports in other sectors. in addition to the solid economic base that comes from our natural resource sectors, we have numerous advantages we can use to create new economic growth. among other things, we have a well - educated and diverse workforce that is growing through immigration. and, we have trade agreements like the canada - united states - mexico agreement, the comprehensive economic and trade agreement with the european union, and the comprehensive and progressive agreement for trans - pacific partnership. these agreements should help to buffer us from some of the negative trade developments i mentioned at the beginning. another possible buffer lies right here at home. recall that when the united states turned protectionist in the 1860s, we responded by uniting our own economic clout through confederation. in today ’ s trade - uncertain world, it is even more important that we continue to make progress in promoting trade among our own provinces and territories. and enhancing economic links between north and south is even more urgent, given the growing risks around climate change. you are already feeling the impact of climate change here, and it will affect almost every aspect of life in the north. lowering barriers to trade could certainly help mitigate these economic impacts. the good news is that trade in services among the provinces has been growing rapidly over the past 10 years and is already larger than interprovincial goods trade. the bad news is that goods trade between provinces has basically been stagnant for a decade. to make this point concrete, bank staff estimate that canada ’ s potential economic growth would increase by about 0. 2 percentage | 0.5 |
rate and entry into erm2. in this respect there may be cause to say something about what has happened earlier. the question of erm participation and the possibility of combining it with the policy of inflation targeting that we have followed for some years has engaged the riksbank earlier, above all in the period 1995 - 97. at that time the riksbank was legally responsible for the choice of exchange rate regime and erm participation was considered simply as a way of preventing the flexible exchange rate regime from becoming a formal obstacle to sweden's possible full participation in the monetary union. when the government then judged that there was insufficient public support for sweden's adoption of the euro, the question of altering the exchange rate regime ceased to be relevant. when the independence of the riksbank was formalised in 1999, the legislation on exchange rate policy was amended. today the exchange rate regime is chosen by the government, while the riksbank decides on issues of its implementation. so it is the government that decides if and when the krona is to join erm2, whereupon the finance ministry and the riksbank discuss the sek / eur exchange rate that is compatible with a stable economic development. i want to make it clear that, contrary to the impression one is liable to get from reports in the media, this process is not to be seen as a struggle between the riksbank and the finance ministry. there are extremely good reasons for these two institutions to agree on a joint line of action. otherwise it is likely to be difficult to argue sweden's case effectively in the subsequent discussions with our european partners. decisions about erm2 participation and the exchange rate on entry are made jointly by the finance ministers of the euro countries, the ecb and the central bank governors and finance ministers of other erm2 participants ( at present denmark ). the first step is taken in practice in the framework of the eu's economic and financial committee. it is only if this committee fails to reach a consensus that the central bank governors and finance ministers concerned engage in direct negotiations. when the time comes - in the event of full participation in the monetary union - for the conversion rate with the euro to be locked irrevocably, this is decided unanimously by the euro - country members of the ecofin council together with sweden. on every previous occasion, these decisions have been based on the central rates in erm / erm2. the choice of a central rate and a | credible in the shorter run, too. that is a prerequisite for a stable development during the period in erm2. that in turn presupposes, for example, that the rate functions properly in relation to the prevailing level of economic activity, the current fiscal policy and so on. the underlying inflationary tendencies that are discernible in labour costs, for instance, also play a part. in these respects it is also possible to produce various numerical examples and simulations. alternative assumptions can be made, for example, about what would be a reasonable exchange rate in the long run and test them against different underlying cyclical developments. an important issue for the riksbank here is the effect on inflation. if it is found that inflation would be unduly high, for example, fiscal policy might have to be tighter. the interaction of the business cycle, for example, and the choice of fiscal policy and exchange rate can be studied in this way. the discussion would benefit from several independent analyses of this kind. economic policy in erm2 if sweden becomes a full participant in the monetary union, the conditions for swedish stabilisation policy will change. the task of conducting a stabilisation policy for swedish needs would then rest - to the extent that it is considered desirable - entirely on the swedish parliament or riksdag and the government. i want to underscore that this change already takes place essentially during the period in erm2. it should be noted that a good state of readiness is absolutely essential. at the riksbank we usually reckon that it takes between 1 and 2 years for changes in monetary policy to elicit their maximum effect on the rate of inflation. we do not know exactly what the corresponding time lag is for the real economic impact of fiscal policy. but there is much to suggest that fiscal policy as early as next year that is, the policy which is being decided this autumn - will be important in this context, at least if the timing that is now being discussed, with full participation in 2005 or 2006, is achieved. thus, more and more of stabilisation policy's burden is transferred to fiscal policy. but this does not mean that the riksbank should refrain from using the scope for monetary policy that may exist during the erm2 period. it is up to the riksbank to do what is possible to make sweden's accession to the monetary union smooth and stable. low and stable inflation in sweden is one important | 1 |
. 39. see european systemic risk board ( 2023 ). 40. see financial stability board ( 2023b ). 41. see european systemic risk board ( 2023 ). 42. see https : / / www. ft. com / join / licence / efeefef3 - 0ec1 - 4aa4 - 8bf0 - 0938f8f18097 / details? ft - contentuuid = 126d8b02 - f06a - 4fd9 - a57b - 9f4ceab3de71, accessed 13 april 2023. 43. see allen ( 2022b ). 44. see organisation for economic co - operation and development ( 2010 ). 45. see https : / / www. bis. org / about / bisih / about. htm, accessed 03 april 2023. 46. see financial stability board ( 2020 ). these recommendations are currently under revision. 47. see financial stability board ( 2022 ). 48. some requirements are stricter than for stablecoins under the european legislation ( mica ). for example, at present, no stablecoin issued on a permissionless blockchain may be classified as a group 1 asset. 49. mica also foresees that issuers of e - money tokens, stablecoins referenced to one single currency, should be required to be issued either by a credit institution, as defined in the capital requirements regulation, or by an e - money institution authorised under the revised electronic money directive ( “ emd2 ” ). 50. see european systemic risk board ( 2023 ). 51. minto, prinz and wulff ( 2021 ) discuss regulatory arbitrage in financial markets. 52. various surveys suggest that the vast majority of consumers do not own crypto - assets. an ecb survey conducted in belgium, germany, spain, france, italy and the netherlands in november 2021 revealed that 10 % of households owned crypto - assets ( european central bank 2022 ). a survey conducted in germany found that 4 % of the population held crypto - assets at the end of the year 2021. see zahlungsverhalten in deutschland 2021 ( bundesbank. de ). an ecb survey covering the entire euro area also found that 4 % of the population owned crypto - assets at the end of the year 2022. see study on the payment | german banks fell from 19 % to 8 %. liquidity provision through central banks increased. [ 15 ] more recently, the volume in the german interbank market has increased, but it remains far below the values observed prior to 2008 ( chart 3 ). chart 3 : interbank exposures have declined following the global financial crisis. while the interbank market is a channel for direct contagion in the financial system, common exposures to the same shock can lead to indirect contagion effects. this risk is particularly acute at the current juncture. higher interest rates and higher risk to the growth outlook expose vulnerabilities in the financial system that have built up over time. maturity transformation exposes banks to interest rate risk. adverse shocks to the real economy can increase credit risk for many banks quite broadly. 1. 3 complexity a highly complex entity can be systemically important. complexity can have different dimensions, such as the volume of derivatives business, a large number of ( international ) affiliates, or operational complexity. the more complex a bank is, the greater the costs and time needed to resolve it. [ 16 ] a cross - border resolution of such an entity requires coordination among authorities in multiple jurisdictions. [ 17 ] a vivid example of the resolution of a complex entity is the lehman brothers insolvency : it took 14 years after the bank ’ s failure to resolve it. 1. 4 substitutability very specialised providers of financial services can be systemically important, even if they are small or not highly complex. providers of infrastructure such as the payment systems services are one example. if such an institution experiences distress or even fails, other services can be disrupted as well and liquidity may dry up. the more specialised the institution, the more costly it is to replace its services. 1. 5 leverage time and again, leverage in the financial system has been a trigger of financial crises. high leverage makes borrowers vulnerable to adverse shocks such as a rise in interest rates or losses in income. this increases credit risk and leads to losses for financial institutions. poorly capitalised – highly “ leveraged ” – financial institutions respond by cutting the provision of financial services and credit, which has negative repercussions for the real economy. therefore, the reform agenda of the past decade has focused on reducing leverage in the financial system. banks are indeed better capitalised than they used to be – while leverage in the private and public sector has continued to increase. 2 are crypto - assets | 1 |
their lowest levels in over two years, falling by 6 and 4 per cent respectively. russian stocks also dropped by similar amounts reaching their lowest level in two years, resulting in the authorities in russia to suspend trading on 17 and 18 september 2008. for that entire week, the stocks of most emerging market countries showed significant declines. those included israel ( - 10, 8 per cent ) ; romania ( - 7, 3 per cent ) ; thailand ( - 4. 5 per cent ) ; south africa ( - 2, 9 per cent ) ; hungary ( - 2, 1 per cent ) ; czech republic ( - 2, 0 per cent ) ; poland and turkey ( - 1, 9 per cent ) and korea ( - 1, 5 per cent ). emerging market bond indices ( embi ) spreads over us treasuries widened sharply during the week under review. the widest spreads were recorded in russia ( 52 bps ) ; argentina ( 42 bps ) ; venezuela and ukraine ( 30 bps ) and china ( 28 bps ). south africa and poland registered the smallest movements with their spreads over us treasuries widening by some 5bps. the currencies of most emerging markets weakened considerably against the usd during the week starting on 15 september on the back of major equity and bond selling in these countries. the biggest depreciations were registered by chile ( - 3, 2 per cent ) followed by brazil ( - 2, 0 per cent ) and iceland ( - 1, 5 per cent ). in the year to date, non - residents have been net sellers of equities to the value of around r52 billion, while net bond sales have totalled almost r17 billion. however it is important to note that these sales do not necessarily translate into actual capital outflows. there is little doubt that the traditional source of foreign capital inflows, that is flows into the equity market, may remain under pressure in the coming months as a result of continued risk aversion. despite the global turmoil, the financial account in south africa has remained in positive territory. while the deficit on the current account of the balance of payments remains at elevated levels, some pressure on the import side will be taken off by growth, lower oil prices and the poor performance of the rand. unfortunately, with a rapidly slowing global economy, commodity prices are expected to remain subdued, and the export markets for commodities and manufactured goods in the current climate will remain a challenge. conclusion | at the beginning of november, the bank released its projections through fiscal 2018 in the outlook for economic activity and prices ( outlook report ). today, i would like to explain the bank's projections for economic activity and prices based on this outlook report, as well as its thinking on the conduct of monetary policy. i. the current situation of and outlook for japan's economic activity and prices to begin with, let me make three points on the outlook for japan's economy. please refer to chart 2. the first point is that extremely powerful economic stimulus measures are being implemented, both on the monetary and fiscal sides. the bank will adhere to powerful monetary easing under the new policy framework in order to achieve the price stability target of 2 percent, while the government will steadily implement its large - scale stimulus measures, amounting to 28 trillion yen in project size, with the diet's recent approval of the supplementary budget. synergy effects are produced in a case where a government proactively carries out fiscal spending while a central bank provides accommodative financial conditions with a view to achieving its price stability target ; this is known to make the stimulative effects on economic activity more powerful. indeed, such effects of the so - called policy mix are expected to be seen going forward. the second point is that, on the back of the effects of a policy mix as well as the recovery in overseas economies, japan's economy is likely to expand moderately, with a virtuous cycle from income to spending being maintained in both the corporate and household sectors. specifically, as indicated in red in the chart, it is likely to continue growing at a pace above its potential through the projection period - - that is, through fiscal 2018 - - at around 1 percent. third, on the price front, the year - on - year rate of change in the cpi for all items less fresh food is likely to be slightly negative or about 0 percent for the time being, as shown in blue in the chart. thereafter, the rate of change is expected to increase toward 2 percent in the second half of the projection period in line with an improvement in the output gap, as will likely be evidenced by a further decline in the unemployment rate, and a rise in medium - to long - term inflation expectations. in what follows, i will explain the outlook for economic activity and prices in more detail. a. the current situation of economic activity and its outlook developments in the corporate sector looking at developments in | 0 |
, g8 and the world economic forum. despite these demonstrations, global economic integration today is far greater than it has ever been and is likely to become even stronger in the coming years. 2. the impact of globalisation on south africa the re - entry of south africa into the globalised financial markets and the opening up to international competition led to a sharp increase in the participation by non - residents in the domestic financial markets. non - residents are now responsible for about one - third of the turnover on the jse securities exchange sa and approximately one - eighth of the volumes on the south african bond exchange. this has caused share and bond prices, as well as the exchange rate of the rand to be increasingly influenced by developments in the rest of the world – particularly in emerging markets. these transactions by non - residents contributed materially to substantial increases in financial sector activity. turnover on the south african bond exchange, for example, increased from r2, 0 trillion in 1995 to r12, 4 trillion in 2001, while the total value of shares traded on the stock exchange rose from r63 billion to r606 billion over the same period. in the foreign exchange market volumes increased from a net average daily turnover of us $ 2, 7 billion in 1995 to us $ 9, 6 billion in 2001. market activity was still fairly brisk in november and december last year, with the net average daily turnover averaging us $ 8 billion. integration into the world financial markets required a major restructuring of the institutional arrangements in the south african capital markets. the jse securities exchange sa introduced reforms to provide for corporate ownership, foreign ownership of stockbrokers, dual capacity trading, negotiated commissions, and electronic screen trading. the securities exchange is continuing to improve its facilities by providing for the immobilisation and dematerialisation of shares, and for improved clearing and settlement arrangements. these changes and the substantial increase in portfolio investments and trade finance by nonresidents contributed to a large inflow of capital but also resulted in greater volatility in the capital movements between south africa and the rest of the world. a nearly consistent net outflow of capital of r48, 3 billion in the period from 1984 to the middle of 1994 was turned around to a net inflow of capital of r61, 3 billion from 1995 to 2000. however, this inflow of capital fluctuated sharply from r16, 6 billion in 1995 to r3, 0 billion in 1996, r21, 3 billion in 1997 | have high rates of inflation which are out of line with the rest of the world, disruptive capital flows could occur because of fears of currency misalignments. the closer integration of the world economy has therefore focused the ultimate objective of monetary policy and made it even more important to attain this objective. it should, however, also be realised that such a policy stance does not provide unconditional protection against speculative capital outflows. external economic shocks or perceived poor policy measures can still trigger a reversal in capital movements. monetary policy cannot prevent these reversals. international investors make their decisions on the basis of a wide variety of developments, including price stability. the best approach that central banks can follow is to pursue financial stability in a transparent and accountable manner so that they can at least forestall any uncertainties in this regard. although the objective of monetary policy has been better focussed within the context of globalisation, the integrated world economy has resulted in a more complex mechanism for transmitting monetary policy. the relationship between changes in interest rates, money supply and inflation has become less clear under these new conditions, compared with the period when south africa was more isolated from external influences. as a result of large international capital flows, the effects of policy changes are being transmitted to a greater extent through critical indicators such as bond yields and exchange rates. these changes in the transmission mechanism of monetary policy have reduced the credibility of the money supply as an intermediate guideline for policy. the integration of financial markets and financial innovations made the demand - for - money function less stable. this was clearly reflected in a consistent decline in the income velocity of circulation of m3 of about 13 per cent from 1994 to 2000. the income velocity of circulation of m3 continued to decline strongly in the first three quarters of 2001. the money supply accordingly became a less reliable anchor for monetary policy. volatile capital movements further complicate the transmission mechanism under floating exchange rates, because of the impact that exchange rate changes have on the foreign transactions of a country. in a closed economy, the transmission mechanism runs from increases in the repo rate and other short - term interest rates through to longer - term interest rates and asset prices and then to aggregate demand and prices. the open economy version of the transmission mechanism under floating exchange rates runs from interest rates, to nominal exchange rates, to the absolute and relative prices of tradeable goods and eventually to the prices of non - tradeable goods. in view of this more complicated transmission mechanism in a reintegrated global | 1 |
deepak mohanty : monetary policy response to recent inflation in india speech by mr deepak mohanty, executive director of the reserve bank of india, at the indian institute of technology ( iit ), guwahati, 3 september 2011. * * * the assistance provided by g. v. nadhanael is acknowledged. i thank the indian institute of technology ( iit ), guwahati and mr. ankit khemka, convenor, techniche 2011, for inviting me to address such a talented and bright group of youngsters. i propose to speak to you about inflation which is a matter of concern to all of us. it has been about two years since october 2009 that the reserve bank of india announced its exit from the crisis - driven accommodative monetary policy stance. however, inflation continues to remain elevated, despite sustained monetary policy action. headline inflation, measured by year - on - year changes in the wholesale price index ( wpi ), averaged 9. 6 per cent in 2010 – 11 and it has continued to be over 9 per cent in the current financial year so far. this spell of high inflation has been the longest since the mid - 1990s. it has, therefore, posed a major challenge for policymakers, especially for the reserve bank as the key objective of monetary policy is price stability. why do we need to worry about inflation? how did the inflation dynamics evolve over the past two years? what was the monetary policy response? these are primarily the questions that i will address. why do we need to worry about inflation? we need to be concerned about inflation as it has adverse impact on the real economy. first, high and persistent inflation imposes significant socio - economic costs. given that the burden of inflation is disproportionately large on the poor, high inflation by itself can lead to distributional inequality. therefore, for a welfare - oriented public policy, low inflation becomes a critical element for ensuring balanced progress. second, high inflation distorts economic incentives by diverting resources away from productive investment to speculative activities. third, inflation reduces households saving as they try to maintain the real value of their consumption. consequent fall in overall investment in the economy reduces its potential growth. fourth, as inflation rises and turns volatile, it raises the inflation risk premia in financial transactions. hence, nominal interest rates tend to be higher than they would have been under low and stable inflation. fifth, if domestic inflation | remains persistently higher than those of the trading partners, it affects external competitiveness through appreciation of the real exchange rate. sixth, as inflation rises beyond a threshold, it has an adverse impact on overall growth. the reserve bank ’ s current assessment suggests that the threshold level of inflation for india is in the range of 4 – 6 per cent1. if inflation persists beyond this level, it could lower economic growth over the medium - term. these costs, therefore, necessitate monetary policy response to control inflation. how did the inflation dynamics change? it is important to appreciate the background in which the inflation surge has occurred. the current phase of high inflation followed the global financial crisis, which affected the india ’ s economy, though not with the same intensity as advanced countries. managing inflation in an reserve bank of india annual report 2010 – 11. bis central bankers ’ speeches economy which is recovering from a downturn is much more complex because of associated uncertainties than managing inflation under normal conditions. prelude to current inflation surge in the initial phase of the crisis, it appeared that emerging market economies ( emes ) were better positioned to weather the storm created by the global financial meltdown on the back of their substantial foreign exchange reserve cushion, improved policy frameworks and generally robust banking sector and corporate balance sheets. however, any hope about emes escaping unscathed could not be sustained after the failure of lehman brothers in september 2008 which triggered global deleveraging and heightened risk aversion. eventually, emes were also adversely affected by the spillover effects : first through contraction in world trade and then from reversal in capital flows. india, though initially somewhat insulated from the global developments, was eventually impacted significantly by the global shocks through all the channels – trade, finance and expectations channels. in response, the reserve bank swiftly introduced a comprehensive range of measures to limit the impact of the adverse global developments on the domestic financial system and the economy. the reserve bank, like most central banks, took a number of conventional and unconventional measures to augment domestic and foreign currency liquidity, and sharply reduced the policy rates. in a span of seven months between october 2008 and april 2009, there was unprecedented policy activism. for example : ( i ) the repo rate was reduced by 425 basis points to 4. 75 per cent, ( ii ) the reverse repo rate was reduced by 275 basis points to 3. 25 per cent, ( iii ) the cash reserve ratio ( crr ) of banks | 1 |
promised until the committee observes sustained economic growth, substantial progress in trimming economic slack, or a period of inflation above a specified floor. in practice, central banks appear to appreciate the importance of influencing market expectations about future policy. for example, in may 2001, with its policy rate virtually at zero, the bank of japan promised that it would keep its policy rate at zero for as long as the economy experienced deflation - - a conditional policy commitment. more recently, the bank of japan has been more explicit about the conditions under which it would begin to raise rates ; for example, it has been specified that a change from deflation to inflation that is perceived to be temporary will not provoke a tightening. 3 in the united states, the august 2003 statement of the federal open market committee that “ policy accommodation can be maintained for a considerable period ” is another example of commitment. the close association of this statement with the committee ’ s expressed concerns about “ unwelcome disinflation ” implied that this commitment was conditioned on the assessment of the economy. the conditional nature of the commitment was sharpened in the committee ’ s december statement, which explicitly linked continuing policy accommodation to the low level of inflation and the slack in resource use. 4 more generally, in recent years central banks have devoted enormous effort to improving their communications and transparency ; a major benefit of such efforts should be a greater ability to align market expectations of policy with the policymaking committee ’ s own intentions. of course, policy commitments can influence future expectations only to the extent that they are credible. various devices might be employed to enhance credibility ; for example, the central bank can make securities purchases or issue financial options that make it quite costly, in financial terms, to renege on its commitments ( clouse et al., 2003 ). an objection to this strategy is that it is not entirely clear why a central bank, which has the power to print money, should be overly concerned about its financial gains and losses. eggertsson and woodford ( 2003 ) point out that a government can more credibly promise to carry out policies that raise prices when ( 1 ) the government debt is large and not indexed to inflation and ( 2 ) the central bank values the reduction in fiscal burden that reflationary policies will bring ( for example, because it may reduce the future level of distortionary taxation ). ultimately, however, the central bank ’ s best strategy for building credibility is to ensure that its deeds match its words, thereby building | trust in its pronouncements. the requirement that deeds match words has the consequence that the shaping of market expectations is not an independent instrument of policy in the long run. ii. altering the composition of the central bank ’ s balance sheet central banks typically hold a variety of assets, and the composition of assets on the central bank ’ s balance sheet offers another potential lever for monetary policy. for example, the federal reserve participates in all segments of the treasury market, with most of its current asset holdings of about $ 670 billion distributed among treasury securities with maturities ranging from four weeks to thirty years. over the past fifty years, the average maturity of the federal reserve system ’ s holdings of treasury debt has varied considerably within a range from one to four years. as an important participant in the treasury market, the federal reserve might be able to influence term premiums, and thus overall yields, by shifting the composition of its holdings, say from shorter - to longer - dated securities. in simple terms, if the liquidity or risk characteristics of securities differ, so that investors do not treat all securities as perfect substitutes, then changes in relative demands by a large purchaser have the potential to alter relative security prices. ( the same logic might lead the central bank to consider purchasing assets other than treasury securities, such as corporate bonds or stocks or for a recent appraisal of monetary policy options in japan, see bernanke ( 2003 ). 2003 fomc statements and minutes. foreign government bonds. the federal reserve is currently authorized to purchase some foreign government bonds but not most private - sector assets, such as corporate bonds or stocks. ) perhaps the most extreme example of a policy keyed to the composition of the central bank ’ s balance sheet is an announced ceiling on some longer - term yield below the prevailing rate. this policy entails ( in principle ) an unlimited commitment to purchase the targeted security at the announced price. ( to keep the overall size of its balance sheet unchanged, the central bank would have to sell other securities in an amount equal to the purchases of the targeted security. ) obviously, such a policy would signal strong dissatisfaction on the part of the policymaking committee with current market expectations of future policy rates. whether policies based on manipulating the composition of the central bank balance sheet can be effective is a contentious issue. the limited empirical evidence generally suggests that the degree of imperfect substitutability within broad asset classes, such as treasury securities, is not great, so that changes in | 1 |
mario draghi : the monetary policy of the european central bank and its transmission in the euro area speech by mr mario draghi, president of the european central bank, at the opening of the academic year 2012 – 2013, universita bocconi, milan, 15 november 2012. * * * financial markets and the disruption caused to the transmission of monetary policy the year that is about to end will be remembered not only for the effects the european sovereign debt crisis has had on the euro and for the significant weakening of the european economy, but also for the responses to these challenges by the ecb, national governments and the european union. the artificial calm in the markets prior to the crisis had, in europe, for a long time allowed misguided economic policies or simply encouraged inaction in countries that had profound need for fiscal consolidation and structural reforms. the outbreak of the crisis substantially increased risk aversion : the weaknesses of these countries were exposed ; in an environment of already weak growth, investors turned away, sovereign spreads started to rise. soon, the solvency of the governments of these countries was questioned, and with it the solvency of the financial institutions located there. within the euro area, less and less money circulated between banks in different countries. doubts about the future of the euro area in its current form encouraged a speculative movement which lead to further increases in sovereign spreads. all the governments of the weaker countries responded with fiscal consolidation policies, initially hesitant, then more vigorous. but economic activity continued to weaken and spreads continued to grow. it was a situation which has brought into focus the nature of the “ ideal ” fiscal consolidation – one which reduces the deficit and the debt with the least negative consequences for a country ’ s gdp. the prevailing evidence indicates that it should be concentrated on reductions in current spending and not on tax increases. even those who do not share this approach agree, however, that it is essential that the process be perceived as credible, irreversible and structural so that it can affect sovereign spreads, and that price stability conditions as well as conditions on financial markets are such that they do not interfere with fiscal consolidation. in response, the ecb lowered its benchmark interest rates. under normal circumstances, such reductions would have been transmitted in a relatively uniform way to households and firms across the euro area. but that ’ s not what we found. in some countries, the rate cuts were fully passed on. in others, the interest rates charged on bank loans to the real | and the economy adjusts more slowly, fiscal policies need to be more expansionary, and for longer, and this can in turn generate spillovers on other participating economies and on the single monetary policy. to give an example of this interaction, ireland and spain were two countries that experienced relatively similar shocks emanating from the financial and construction sectors. both saw their primary deficits deteriorate by around 13pp of gdp between 2007 and 2009. however, by 2012 ireland had reduced that deficit by more than 7pp of gdp, whereas in spain the primary deficit was less than 2pp lower. this certainly reflected stronger consolidation efforts in ireland as part of its adjustment programme. but it also reflected the faster adjustment in prices and wages in the irish economy, which helped unemployment to begin stabilising in late 2010, while in spain it rose until early 2013. of course many other factors were at play as well, but the point is that economic flexibility matters for the size and duration of deficits. and what this implies is that, if structural reforms do not happen, there can be a form of “ structural dominance ” over fiscal policies. when a shock hits fiscal policies are forced to do all the heavy lifting to stabilise the economy and, over time, fiscal space becomes progressively exhausted. indeed, this is one explanation for why the stability and growth pact ( sgp ) rules have not been as effective as we hoped. there is a correlation between the ease with which countries comply with the rules and their progress on structural reforms. effectively, through lack of reforms some countries have put themselves in a position of excessive deficit dependence, which then makes the difficulty and costs of meeting their obligations higher. the conclusion, therefore, is that constantly tinkering with our common fiscal rules while leaving governance of structural policies entirely at the national level makes little sense. if fiscal policies are to be freed from structural dominance, then we need an equally strong framework in both domains. and it is fair to say in the eu context that the macroeconomic imbalance procedure ( mip ) has less teeth and has not benefited from the same level of ownership and political attention than the stability and growth pact. we could also envisage some complementarities between the two. for example, it does make sense to take into account structural reforms when assessing compliance with the sgp, as the commission now intends to do. 9 this is because structural reforms not only for a review see mckinnon, r. ( 2001 ), | 0.5 |
. i highlighted some of these questions with you today. i have enjoyed immensely having to grapple with these issues but recognize that we at the central bank may have all of the right questions but do not have all the answers. | that early childhood education programs make children better prepared for school, a precursor of future success. 3 the benefits of early childhood programs are not just short - term in nature. careful studies demonstrate that early interventions can have a positive effect on young children from low - income families that lasts well into adulthood. for example, analysis of one program showed that children who attended a high - quality half - day preschool program at ages 3 and see national scientific council on the developing child ( 2005 ), “ excessive stress disrupts the architecture of the developing brain, ” working paper no. 3 ( cambridge, mass. : center on the developing child at harvard university, summer ). see arthur rolnick and rob grunewald ( 2011 ), “ the economic case for targeted preschool programs, ” in edward zigler, walter s. gilliam, and w. steven barnett, eds., the pre - k debates : current controversies and issues ( baltimore : brookes publishing ), pp. 22 – 26. see vivian c. wong, thomas d. cook, w. steven barnett, and kwanghee jung ( 2008 ), “ an effectiveness - based evaluation of five state pre - kindergarten programs, ” journal of policy analysis and management, vol. 27 ( winter ), pp. 122 – 54. bis central bankers ’ speeches 4 were, at age 40, more economically successful – for example, more likely to own their own homes – than nonparticipants in a control group. 4 in other evaluations, long - term benefits were demonstrated for a full - day early childhood education program starting before age 1 and for a nurse - based home visiting program. 5 economically speaking, early childhood programs are a good investment, with inflation - adjusted annual rates of return on the funds dedicated to these programs estimated to reach 10 percent or higher. 6 very few alternative investments can promise that kind of return. notably, a portion of these economic returns accrues to the children themselves and their families, but studies show that the rest of society enjoys the majority of the benefits, reflecting the many contributions that skilled and productive workers make to the economy. 7 the federal reserve has long supported increasing educational opportunity for children, including the youngest. federal reserve banks have published articles and convened community forums on early childhood issues. for school - age children, we sponsor financial literacy and economic education programs. for these programs, we make a special effort to reach schools with high proportions of minorities and lower - income children. many | 0.5 |
session by quoting from on the origin of species by british naturalist charles darwin : " it is not the most intellectual of the species that survives ; it is not the strongest that survives ; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself. " 1 baku hit by widespread flooding ( msn. com ). 2 what to know about the floods that killed over 200 in spain | time. 3 finance & prosperity 2024 ( worldbank. org ). 4 finance & prosperity 2024 ( worldbank. org ) / the stated figures are from 2022. 5 adaptation gap report 2024 | unep - un environment programme. 3 / 4 bis - central bankers'speeches 6 ngfs conceptual note on adaptation, november 2024. 7 world bank, 2019 open knowledge repository ( worldbank. org ). 8 standard chartered / kpmg / undrr, 2024, guide for adaptation and resilience finance | undrr. 9 global commission on adaptation, september 2019, adapt now : a global call for leadership on climate resilience - global center on adaptation ( gca. org ). 4 / 4 bis - central bankers'speeches | : we need to get better at touting the benefits of climate adaptation. what exactly are these benefits? first, reducing climate damages can lessen the financial burden on governments and the private sector. second, reduced climate damages and lower insurance costs yield notable benefits for the economy and beyond. the world bank estimates that every usd 1 spent on adaptation returns usd 4 in overall socio - economic benefits. 7 more recent studies point to an even greater costbenefit ratio – as high as usd 1 : 12. 8 third, non - market social and environmental benefits will accrue over time. for example, preserving wetlands and coastal mangroves bolsters resilience. this is particularly important for low income countries and disadvantaged groups ( including women ). this triad of benefits is often referred to as the " triple dividend ". 9 what matters now is translating these promising payoffs into larger investments in climate adaptation. before i conclude, i would like to briefly discuss the role of the ngfs in this context. 3 role of the ngfs and closing remarks 2 / 4 bis - central bankers'speeches it is the responsibility and duty of central banks and supervisory authorities to raise awareness about significant risk to the economy and the financial sector. a lack of preparedness for severe weather events is such a risk. the network for greening the financial system ( ngfs ), which i chair, provides practical guidance and assistance to our more than 140 members and beyond. our focus lies on managing climate - related risks. this will help create the conditions to mobilize more private capital for climate financing, including for adaptation. i encourage all of you to take a look at our new conceptual note on adaptation. and i can assure you that the ngfs won't let go of this important subject. our taskforce adaptation is currently focusing on future priority areas. these include integrating adaptation considerations into transition planning, addressing insurance protection gaps, and exploring the link between adaptation and inflation. we aim to launch a comprehensive report on adaptation at the cop30 in brazil a year from now. obviously, all this would not have be possible without the extraordinary effort and hard work of sean carmody, executive director at apra, and shelagh kahonda, executive director of the financial stability directorate at the national bank of rwanda. thank you both for leading the charge on this issue in our network and for giving me the opportunity to speak at this important cop29 session. i would like to conclude today's | 1 |
a rise in the exchange rate, all else being equal, implies a tightening of monetary conditions, a downward impact on inflation and potentially a threat to the ongoing recovery. if so, this would call for policy action to maintain the current accommodative stance. this is why we have said that the exchange rate is an increasingly important factor in our assessment of the outlook for price stability. this assessment, however, needs to take in the whole picture. to the extent that the exchange rate is rising because confidence in the euro area is returning and capital inflows are increasing, this leads also to looser financing conditions. while exchange rate appreciation contributes to low inflation in the short run, falling long - term rates support rising inflation over time, insofar as they are passed on into lower bank lending rates and stimulate demand. as a result, the overall policy stance has to take this balance of forces into account. bis central bankers ’ speeches what would be our policy response should this contingency arise? in our view an undue tightening of the policy stance can be addressed through a variety of more conventional measures. these include a further lowering of the interest rate corridor, including a negative deposit rate. they include a further extension of the fixed - rate full allotment procedure, beyond the period currently envisaged. remember that in november 2013 we announced our decision to continue conducting the main refinancing operations ( mros ) as fixed - rate tender procedures, with full allotment, at least until july 2015. finally, if necessary, the measures could include new liquidity injections via our liquidity operations, including longerterm fixed - rate operations. another contingency that would warrant a monetary policy reaction would be further impairments in the transmission of our stance, in particular via the bank lending channel. given the reduction in bank funding costs over the last year and the ongoing clean - up of the banking sector through the comprehensive assessment, our assessment is that bank lending conditions are improving and will continue to improve. 6 yet if this scenario does not materialise, we may have to respond. this could take several forms, including a longer - term refinancing operation targeted towards encouraging bank lending or an abs purchase programme, supported by the necessary regulatory changes aimed at revitalising high quality securitisation in europe. a third contingency would be a worsening of the medium - term outlook for inflation. one cause for this could be by a broad - | jean - claude trichet : award acceptance speech for the grand cross 1st class of the order of merit speech by mr jean - claude trichet, president of the european central bank, at the award of the grand cross 1st class of the order of merit by the president of the federal republic of germany, berlin, 3 april 2008. * * * mr president, dear eva, your excellency, dear friends, i will not attempt to conceal the fact that i am extremely touched : touched to be here with you, mr president, in this magnificent palace of yours ; very touched to have such a prestigious honour bestowed on me by the federal republic of germany ; and touched to find myself surrounded by so many friends with whom we have worked with such energy in deepening and strengthening the friendship that exists both between france and germany and across europe as a whole. mr president, thank you from the bottom of my heart for awarding me this grand cross, which i regard as an honour bestowed on the whole of the executive board and the governing council and all of the staff of the european central bank. mr president, dear horst, being here with you today, i am inevitably reminded of certain shared experiences, events that are now etched firmly in my memory as landmarks in what has been a truly historic period. • my first memory is of the fall of the berlin wall in 1989. you were tasked with organising the reunification of germany as state secretary at the federal ministry of finance. i remember accompanying you in 1990 on a long journey by helicopter over east germany to berlin, during which you explained to me the colossal economic and financial stakes involved in reunification. • my second memory is of the soviet union itself suffering serious financial problems prior to its collapse in 1991. we were in moscow together with our partners, the other g7 state secretaries, to negotiate with the kremlin – which had, by then, lost all of its power and had an “ end of empire ” feel to it – with a view to rescheduling the soviet union ’ s debt. • my third memory is of the decision in europe to enter into intergovernmental negotiations with a view to establishing the single currency. you were negotiating on behalf of germany. we met many times in order to prepare the text of the maastricht treaty. i will always remember a long discussion we had in 1991, when i remember having the impression that we had convinced each other that our respective countries really wanted to go through with this – but | 0.5 |
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